Republic of the Philippines Erlinda could not return theP200,000.
00 advance because it had
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 156125 August 25, 2010
FRANCISCO MUOZ, JR., Petitioner,
vs.
ERLINDA RAMIREZ and ELISEO CARLOS, Respondents.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari 1 filed by
petitioner Francisco Muoz, Jr. (petitioner) to challenge the
decision2 and the resolution3 of the Court of Appeals (CA) in CA-
G.R. CV No. 57126.4 The CA decision set aside the decision5 of
the Regional Trial Court (RTC), Branch 166, Pasig City, in Civil
Case No. 63665. The CA resolution denied the petitioners
subsequent motion for reconsideration.
FACTUAL BACKGROUND
The facts of the case, gathered from the records, are briefly
summarized below.
Subject of the present case is a seventy-seven (77)-square meter
residential house and lot located at 170 A. Bonifacio Street,
Mandaluyong City (subject property), covered by Transfer
Certificate of Title (TCT) No. 7650 of the Registry of Deeds of
Mandaluyong City in the name of the petitioner.6
The residential lot in the subject property was previously covered
by TCT No. 1427, in the name of Erlinda Ramirez, married to
Eliseo Carlos (respondents).7
On April 6, 1989, Eliseo, a Bureau of Internal Revenue employee,
mortgaged TCT No. 1427, with Erlindas consent, to the
Government Service Insurance System (GSIS) to secure
a P136,500.00 housing loan, payable within twenty (20) years,
through monthly salary deductions of P1,687.66.8 The respondents
then constructed a thirty-six (36)-square meter, two-story
residential house on the lot.
On July 14, 1993, the title to the subject property was transferred
to the petitioner by virtue of a Deed of Absolute Sale, dated April
30, 1992, executed by Erlinda, for herself and as attorney-in-fact of
Eliseo, for a stated consideration of P602,000.00.9
On September 24, 1993, the respondents filed a complaint with the
RTC for the nullification of the deed of absolute sale, claiming that
there was no sale but only a mortgage transaction, and the
documents transferring the title to the petitioners name were
falsified.
The respondents alleged that in April 1992, the petitioner granted
them a P600,000.00 loan, to be secured by a first mortgage on
TCT No. 1427; the petitioner gave Erlinda
a P200,000.0010 advance to cancel the GSIS mortgage, and made
her sign a document purporting to be the mortgage contract; the
petitioner promised to give the P402,000.00 balance when Erlinda
surrenders TCT No. 1427 with the GSIS mortgage cancelled, and
submits an affidavit signed by Eliseo stating that he waives all his
rights to the subject property; with the P200,000.00 advance,
Erlinda paid GSIS P176,445.2711 to cancel the GSIS mortgage on
TCT No. 1427;12 in May 1992, Erlinda surrendered to the petitioner
the clean TCT No. 1427, but returned Eliseos affidavit, unsigned;
since Eliseos affidavit was unsigned, the petitioner refused to give
the P402,000.00 balance and to cancel the mortgage, and
demanded that Erlinda return the P200,000.00 advance; since
been used to pay the GSIS loan, the petitioner kept the title; and in
1993, they discovered that TCT No. 7650 had been issued in the
petitioners name, cancelling TCT No.1427 in their name.
The petitioner countered that there was a valid contract of sale. He
alleged that the respondents sold the subject property to him after
he refused their offer to mortgage the subject property because
they lacked paying capacity and were unwilling to pay the
incidental charges; the sale was with the implied promise to
repurchase within one year,13 during which period (from May 1,
1992 to April 30, 1993), the respondents would lease the subject
property for a monthly rental of P500.00;14 when the respondents
failed to repurchase the subject property within the one-year period
despite notice, he caused the transfer of title in his name on July
14, 1993;15 when the respondents failed to pay the monthly rentals
despite demand, he filed an ejectment case16 against them with the
Metropolitan Trial Court (MeTC), Branch 60, Mandaluyong City, on
September 8, 1993, or sixteen days before the filing of the RTC
case for annulment of the deed of absolute sale.
During the pendency of the RTC case, or on March 29, 1995, the
MeTC decided the ejectment case. It ordered Erlinda and her
family to vacate the subject property, to surrender its possession to
the petitioner, and to pay the overdue rentals.17
In the RTC, the respondents presented the results of the scientific
examination18 conducted by the National Bureau of Investigation of
Eliseos purported signatures in the Special Power of
Attorney19 dated April 29, 1992 and the Affidavit of waiver of rights
dated April 29, 1992,20 showing that they were forgeries.
The petitioner, on the other hand, introduced evidence on the
paraphernal nature of the subject property since it was registered
in Erlindas name; the residential lot was part of a large parcel of
land owned by Pedro Ramirez and Fructuosa Urcla, Erlindas
parents; it was the subject of Civil Case No. 50141, a complaint for
annulment of sale, before the RTC, Branch 158, Pasig City, filed by
the surviving heirs of Pedro against another heir, Amado Ramirez,
Erlindas brother; and, as a result of a compromise agreement,
Amado agreed to transfer to the other compulsory heirs of Pedro,
including Erlinda, their rightful shares of the land.21
THE RTC RULING
In a Decision dated January 23, 1997, the RTC dismissed the
complaint. It found that the subject property was Erlindas
exclusive paraphernal property that was inherited from her father.
It also upheld the sale to the petitioner, even without Eliseos
consent as the deed of absolute sale bore the genuine signatures
of Erlinda and the petitioner as vendor and vendee, respectively. It
concluded that the NBI finding that Eliseos signatures in the
special power of attorney and in the affidavit were forgeries was
immaterial because Eliseos consent to the sale was not
necessary.22
The respondents elevated the case to the CA via an ordinary
appeal under Rule 41 of the Revised Rules of Court.
THE CA RULING
The CA decided the appeal on June 25, 2002. Applying the second
paragraph of Article 15823 of the Civil Code and Calimlim-Canullas
v. Hon. Fortun,24 the CA held that the subject property, originally
Erlindas exclusive paraphernal property, became conjugal
property when it was used as collateral for a housing loan that was
paid through conjugal funds Eliseos monthly salary deductions;
the subject property, therefore, cannot be validly sold or mortgaged
without Eliseos consent, pursuant to Article 12425 of the Family
Code. Thus, the CA declared void the deed of absolute sale, and
set aside the RTC decision.
When the CA denied26 the subsequent motion for
reconsideration,27 the petitioner filed the present petition for review
on certiorari under Rule 45 of the Revised Rules of Court.
THE PETITION
The petitioner argues that the CA misapplied the second
paragraph of Article 158 of the Civil Code and Calimlim-
Canullas28 because the respondents admitted in the complaint that
it was the petitioner who gave the money used to cancel the GSIS
mortgage on TCT No. 1427; Article 12029 of the Family Code is the
applicable rule, and since the value of the house is less than the
value of the lot, then Erlinda retained ownership of the subject
property. He also argues that the contract between the parties was
a sale, not a mortgage, because (a) Erlinda did not deny her
signature in the document;30 (b) Erlinda agreed to sign a contract
of lease over the subject property;31 and, (c) Erlinda executed a
letter, dated April 30, 1992, confirming the conversion of the loan
application to a deed of sale.32
THE CASE FOR THE RESPONDENTS
The respondents submit that it is unnecessary to compare the
respective values of the house and of the lot to determine
ownership of the subject property; it was acquired during their
marriage and, therefore, considered conjugal property. They also
submit that the transaction between the parties was not a sale, but
an equitable mortgage because (a) they remained in possession of
the subject property even after the execution of the deed of
absolute sale, (b) they paid the 1993 real property taxes due on
the subject property, and (c) they receivedP200,000.00 only of the
total stated price of P602,000.00.
THE ISSUE
The issues in the present case boil down to (1) whether the subject
property is paraphernal or conjugal; and, (2) whether the contract
between the parties was a sale or an equitable mortgage.
OUR RULING
We deny the present Petition but for reasons other than those
advanced by the CA.
This Court is not a trier of facts. However, if the inference, drawn
by the CA, from the facts is manifestly mistaken, as in the present
case, we can review the evidence to allow us to arrive at the
correct factual conclusions based on the record. 33
First Issue:
Paraphernal or Conjugal?
As a general rule, all property acquired during the marriage,
whether the acquisition appears to have been made, contracted or
registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved.34
In the present case, clear evidence that Erlinda inherited the
residential lot from her father has sufficiently rebutted this
presumption of conjugal ownership.35 Pursuant to Articles 9236 and
10937 of the Family Code, properties acquired by gratuitous title by
either spouse, during the marriage, shall be excluded from the
community property and be the exclusive property of each
spouse.38 The residential lot, therefore, is Erlindas exclusive
paraphernal property.
The CA, however, held that the residential lot became conjugal
when the house was built thereon through conjugal funds, applying
the second paragraph of Article 158 of the Civil Code and
Calimlim-Canullas.39 Under the second paragraph of Article 158 of
the Civil Code, a land that originally belonged to one spouse
becomes conjugal upon the construction of improvements thereon
at the expense of the partnership. We applied this provision in
Calimlim-Canullas,40 where we held that when the conjugal house
is constructed on land belonging exclusively to the husband, the
land ipso facto becomes conjugal, but the husband is entitled to
reimbursement of the value of the land at the liquidation of the
conjugal partnership.
The CA misapplied Article 158 of the
Civil Code and Calimlim-Canullas
We cannot subscribe to the CAs misplaced reliance on Article 158
of the Civil Code and Calimlim-Canullas.
As the respondents were married during the effectivity of the Civil
Code, its provisions on conjugal partnership of gains (Articles 142
to 189) should have governed their property relations. However,
with the enactment of the Family Code on August 3, 1989, the Civil
Code provisions on conjugal partnership of gains, including Article
158, have been superseded by those found in the Family Code
(Articles 105 to 133). Article 105 of the Family Code states:
xxxx
The provisions of this Chapter [on the Conjugal Partnership of
Gains] shall also apply to conjugal partnerships of gains already
established between spouses before the effectivity of this Code,
without prejudice to vested rights already acquired in accordance
with the Civil Code or other laws, as provided in Article 256.
Thus, in determining the nature of the subject property, we refer to
the provisions of the Family Code, and not the Civil Code, except
with respect to rights then already vested.
Article 120 of the Family Code, which supersedes Article 158 of
the Civil Code, provides the solution in determining the ownership
of the improvements that are made on the separate property of the
spouses, at the expense of the partnership or through the acts or
efforts of either or both spouses. Under this provision, when the
cost of the improvement and any resulting increase in value are
more than the value of the property at the time of the improvement,
the entire property of one of the spouses shall belong to the
conjugal partnership, subject to reimbursement of the value of the
property of the owner-spouse at the time of the improvement;
otherwise, said property shall be retained in ownership by the
owner-spouse, likewise subject to reimbursement of the cost of the
improvement.41
In the present case, we find that Eliseo paid a portion only of the
GSIS loan through monthly salary deductions. From April 6,
198942 to April 30, 1992,43 Eliseo paid about P60,755.76,44 not the
entire amount of the GSIS housing loan plus interest, since the
petitioner advanced the P176,445.2745 paid by Erlinda to cancel
the mortgage in 1992. Considering the P136,500.00 amount of the
GSIS housing loan, it is fairly reasonable to assume that the value
of the residential lot is considerably more than the P60,755.76
amount paid by Eliseo through monthly salary deductions.
Thus, the subject property remained the exclusive paraphernal
property of Erlinda at the time she contracted with the petitioner;
the written consent of Eliseo to the transaction was not necessary.
The NBI finding that Eliseos signatures in the special power of
attorney and affidavit were forgeries was immaterial.
Nonetheless, the RTC and the CA apparently failed to consider the
real nature of the contract between the parties.
Second Issue:
Sale or Equitable Mortgage?
Jurisprudence has defined an equitable mortgage "as one which
although lacking in some formality, or form or words, or other
requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a
debt, there being no impossibility nor anything contrary to law in
this intent."46
Article 1602 of the Civil Code enumerates the instances when a
contract, regardless of its nomenclature, may be presumed to be
an equitable mortgage: (a) when the price of a sale with right to
repurchase is unusually inadequate; (b) when the vendor
remains in possession as lessee or otherwise; (c) when upon
or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is
executed; (d) when the purchaser retains for himself a part of
the purchase price; (e) when the vendor binds himself to pay
the taxes on the thing sold; and, (f) in any other case where it
may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the
performance of any other obligation. These instances apply to a
contract purporting to be an absolute sale.47
For the presumption of an equitable mortgage to arise under
Article 1602 of the Civil Code, two (2) requisites must concur: (a)
that the parties entered into a contract denominated as a contract
of sale; and, (b) that their intention was to secure an existing debt
by way of a mortgage. Any of the circumstances laid out in Article
1602 of the Civil Code, not the concurrence nor an overwhelming
number of the enumerated circumstances, is sufficient to support
the conclusion that a contract of sale is in fact an equitable
mortgage.48
Contract is an equitable mortgage
In the present case, there are four (4) telling circumstances
pointing to the existence of an equitable mortgage.
First, the respondents remained in possession as lessees of the
subject property; the parties, in fact, executed a one-year contract
of lease, effective May 1, 1992 to April 30, 1993.49
Second, the petitioner retained part of the "purchase price," the
petitioner gave a P200,000.00 advance to settle the GSIS housing
loan, but refused to give the P402,000.00 balance when Erlinda
failed to submit Eliseos signed affidavit of waiver of rights.
Third, respondents paid the real property taxes on July 8, 1993,
despite the alleged sale on April 30, 1992;50payment of real
property taxes is a usual burden attaching to ownership and when,
as here, such payment is coupled with continuous possession of
the property, it constitutes evidence of great weight that the person
under whose name the realty taxes were declared has a valid and
rightful claim over the land.51
Fourth, Erlinda secured the payment of the principal debt owed to
the petitioner with the subject property. The records show that the
petitioner, in fact, sent Erlinda a Statement of Account showing that
as of February 20, 1993, she owed P384,660.00, and the daily
interest, starting February 21, 1993, was P641.10.52 Thus, the
parties clearly intended an equitable mortgage and not a contract
of sale.
That the petitioner advanced the sum of P200,000.00 to Erlinda is
undisputed. This advance, in fact, prompted the latter to transfer
the subject property to the petitioner. Thus, before the respondents
can recover the subject property, they must first return the amount
of P200,000.00 to the petitioner, plus legal interest of 12% per
annum, computed from April 30, 1992.
We cannot sustain the ballooned obligation of P384,660.00,
claimed in the Statement of Account sent by the petitioner,53 sans
any evidence of how this amount was arrived at. Additionally, a
daily interest of P641.10 orP19,233.00 per month for
a P200,000.00 loan is patently unconscionable. While parties are
free to stipulate on the interest to be imposed on monetary
obligations, we can step in to temper the interest rates if they are
unconscionable.54
In Lustan v. CA,55 where we established the reciprocal obligations
of the parties under an equitable mortgage, we ordered the
reconveyance of the property to the rightful owner therein upon the
payment of the loan within ninety (90) days from the finality of the
decision.56
WHEREFORE, in light of all the foregoing, we hereby DENY the
present petition. The assailed decision and resolution of the Court
of Appeals in CA-G.R. CV No. 57126 are AFFIRMED with the
following MODIFICATIONS:
1. The Deed of Absolute Sale dated April 30, 1992 is
hereby declared an equitable mortgage; and
2. The petitioner is obligated to RECONVEY to the
respondents the property covered by Transfer Certificate
of Title No. 7650 of the Register of Deeds of
Mandaluyong City, UPON THE PAYMENT
OFP200,000.00, with 12% legal interest from April 30,
1992, by respondents within NINETY DAYS FROM THE
FINALITY OF THIS DECISION.
Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 182435 August 13, 2012
LILIA B. ADA, LUZ B. ADANZA, FLORA C. BA YLON, REMO BA
YLON, JOSE BA YLON, ERIC BA YLON, FLORENTINO BA
YLON, and MA. RUBY BA YLON, Petitioners,
vs.
FLORANTE BA YLON, Respondent.
VILLARAMA, JR.,*
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45
of the Rules of Court seeking to annul and set aside the
Decision1 dated October 26, 2007 rendered by the Court of
Appeals (CA) in CA-G.R. CV No. 01746. The assailed decision
partially reversed and set aside the Decision2 dated October 20,
2005 issued ~y the Regional Trial Court (RTC), Tan jay City,
Negros Oriental, Branch 43 in Civil Case No. 11657.
The Antecedent Facts
This case involves the estate of spouses Florentino Baylon and
Maximina Elnas Baylon (Spouses Baylon) who died on November
7, 1961 and May 5, 1974, respectively.3 At the time of their death,
Spouses Baylon were survived by their legitimate children, namely,
Rita Baylon (Rita), Victoria Baylon (Victoria), Dolores Baylon
(Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and
herein petitioner Lilia B. Ada (Lilia).
Dolores died intestate and without issue on August 4, 1976.
Victoria died on November 11, 1981 and was survived by her
daughter, herein petitioner Luz B. Adanza. Ramon died intestate
on July 8, 1989 and was survived by herein respondent Florante
Baylon (Florante), his child from his first marriage, as well as by
petitioner Flora Baylon, his second wife, and their legitimate
children, namely, Ramon, Jr. and herein petitioners Remo, Jose,
Eric, Florentino and Ma. Ruby, all surnamed Baylon.
On July 3, 1996, the petitioners filed with the RTC a Complaint 4 for
partition, accounting and damages against Florante, Rita and
Panfila. They alleged therein that Spouses Baylon, during their
lifetime, owned 43 parcels of land5 all situated in Negros Oriental.
After the death of Spouses Baylon, they claimed that Rita took
possession of the said parcels of land and appropriated for herself
the income from the same. Using the income produced by the said
parcels of land, Rita allegedly purchased two parcels of land, Lot
No. 47096 and half of Lot No. 4706,7situated in Canda-uay,
Dumaguete City. The petitioners averred that Rita refused to effect
a partition of the said parcels of land.
In their Answer,8 Florante, Rita and Panfila asserted that they and
the petitioners co-owned 229 out of the 43 parcels of land
mentioned in the latters complaint, whereas Rita actually owned
10 parcels of land10 out of the 43 parcels which the petitioners
sought to partition, while the remaining 11 parcels of land are
separately owned by Petra Cafino Adanza,11 Florante,12 Meliton
Adalia,13 Consorcia Adanza,14 Lilia15 and Santiago
Mendez.16Further, they claimed that Lot No. 4709 and half of Lot
No. 4706 were acquired by Rita using her own money. They
denied that Rita appropriated solely for herself the income of the
estate of Spouses Baylon, and expressed no objection to the
partition of the estate of Spouses Baylon, but only with respect to
the co-owned parcels of land.
During the pendency of the case, Rita, through a Deed of Donation
dated July 6, 1997, conveyed Lot No. 4709 and half of Lot No.
4706 to Florante. On July 16, 2000, Rita died intestate and without
any issue. Thereafter, learning of the said donation inter vivos in
favor of Florante, the petitioners filed a Supplemental
Pleading17 dated February 6, 2002, praying that the said donation
in favor of the respondent be rescinded in accordance with Article
1381(4) of the Civil Code. They further alleged that Rita was
already sick and very weak when the said Deed of Donation was
supposedly executed and, thus, could not have validly given her
consent thereto.
Florante and Panfila opposed the rescission of the said donation,
asserting that Article 1381(4) of the Civil Code applies only when
there is already a prior judicial decree on who between the
contending parties actually owned the properties under litigation. 18
The RTC Decision
On October 20, 2005, the RTC rendered a Decision, 19 the decretal
portion of which reads:
Wherefore judgment is hereby rendered:
(1) declaring the existence of co-ownership over parcels
nos. 1, 2, 3, 5, 7, 10, 13, 14, 16, 17, 18, 26, 29, 30, 33,
34, 35, 36, 40 and 41 described in the complaint;
(2) directing that the above mentioned parcels of land be
partitioned among the heirs of Florentino Baylon and
Maximina Baylon;
(3) declaring a co-ownership on the properties of Rita
Baylon namely parcels no[s]. 6, 11, 12, 20, 24, 27, 31,
32, 39 and 42 and directing that it shall be partitioned
among her heirs who are the plaintiffs and defendant in
this case;
(4) declaring the donation inter vivos rescinded without
prejudice to the share of Florante Baylon to the estate of
Rita Baylon and directing that parcels nos. 1 and 2
paragraph V of the complaint be included in the division
of the property as of Rita Baylon among her heirs, the
parties in this case;
(5) excluding from the co-ownership parcels nos. 20, 21,
22, 9, 43, 4, 8, 19 and 37.
Considering that the parties failed to settle this case amicably and
could not agree on the partition, the parties are directed to
nominate a representative to act as commissioner to make the
partition. He shall immediately take [his] oath of office upon [his]
appointment. The commissioner shall make a report of all the
proceedings as to the partition within fifteen (15) days from the
completion of this partition. The parties are given ten (10) days
within which to object to the report after which the Court shall act
on the commissioner report.
SO ORDERED.20 (Emphasis ours)
The RTC held that the death of Rita during the pendency of the
case, having died intestate and without any issue, had rendered
the issue of ownership insofar as parcels of land which she claims
as her own moot since the parties below are the heirs to her
estate. Thus, the RTC regarded Rita as the owner of the said 10
parcels of land and, accordingly, directed that the same be
partitioned among her heirs. Nevertheless, the RTC rescinded the
donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in
favor of Florante. In rescinding the said donation inter vivos, the
RTC explained that:
However, with respect to lot nos. 4709 and 4706 which [Rita] had
conveyed to Florante Baylon by way of donation inter vivos, the
plaintiffs in their supplemental pleadings (sic) assailed the same to
be rescissible on the ground that it was entered into by the
defendant Rita Baylon without the knowledge and approval of the
litigants [or] of competent judicial authority. The subject parcels of
lands are involved in the case for which plaintiffs have asked the
Court to partition the same among the heirs of Florentino Baylon
and Maximina Elnas.
Clearly, the donation inter vivos in favor of Florante Baylon was
executed to prejudice the plaintiffs right to succeed to the estate of
Rita Baylon in case of death considering that as testified by
Florante Baylon, Rita Baylon was very weak and he tried to give
her vitamins x x x. The donation inter vivos executed by Rita
Baylon in favor of Florante Baylon is rescissible for the reason that
it refers to the parcels of land in litigation x x x without the
knowledge and approval of the plaintiffs or of this Court. However,
the rescission shall not affect the share of Florante Baylon to the
estate of Rita Baylon.21
Florante sought reconsideration of the Decision dated October 20,
2005 of the RTC insofar as it rescinded the donation of Lot No.
4709 and half of Lot No. 4706 in his favor.22 He asserted that, at
the time of Ritas death on July 16, 2000, Lot No. 4709 and half of
Lot No. 4706 were no longer part of her estate as the same had
already been conveyed to him through a donation inter vivos three
years earlier. Thus, Florante maintained that Lot No. 4709 and half
of Lot No. 4706 should not be included in the properties that
should be partitioned among the heirs of Rita.
On July 28, 2006, the RTC issued an Order23 which denied the
motion for reconsideration filed by Florante.
The CA Decision
On appeal, the CA rendered a Decision24 dated October 26, 2007,
the dispositive portion of which reads:
WHEREFORE, the Decision dated October 20, 2005 and Order
dated July 28, 2006 are REVERSEDand SET ASIDE insofar as
they decreed the rescission of the Deed of Donation dated July 6,
1997 and the inclusion of lot no. 4709 and half of lot no. 4706 in
the estate of Rita Baylon. The case isREMANDED to the trial court
for the determination of ownership of lot no. 4709 and half of lot
no. 4706.
SO ORDERED.25
The CA held that before the petitioners may file an action for
rescission, they must first obtain a favorable judicial ruling that Lot
No. 4709 and half of Lot No. 4706 actually belonged to the estate
of Spouses Baylon and not to Rita. Until then, the CA asserted, an
action for rescission is premature. Further, the CA ruled that the
petitioners action for rescission cannot be joined with their action
for partition, accounting and damages through a mere
supplemental pleading. Thus:
If Lot No. 4709 and half of Lot No. 4706 belonged to the Spouses
estate, then Rita Baylons donation thereof in favor of Florante
Baylon, in excess of her undivided share therein as co-heir, is void.
Surely, she could not have validly disposed of something she did
not own. In such a case, an action for rescission of the donation
may, therefore, prosper.
If the lots, however, are found to have belonged exclusively to Rita
Baylon, during her lifetime, her donation thereof in favor of
Florante Baylon is valid. For then, she merely exercised her
ownership right to dispose of what legally belonged to her. Upon
her death, the lots no longer form part of her estate as their
ownership now pertains to Florante Baylon. On this score, an
action for rescission against such donation will not prosper. x x x.
Verily, before plaintiffs-appellees may file an action for rescission,
they must first obtain a favorable judicial ruling that lot no. 4709
and half of lot no. 4706 actually belonged to the estate of Spouses
Florentino and Maximina Baylon, and not to Rita Baylon during her
lifetime. Until then, an action for rescission is premature. For this
matter, the applicability of Article 1381, paragraph 4, of the New
Civil Code must likewise await the trial courts resolution of the
issue of ownership.
Be that as it may, an action for rescission should be filed by the
parties concerned independent of the proceedings below. The first
cannot simply be lumped up with the second through a mere
supplemental pleading.26 (Citation omitted)
The petitioners sought reconsideration27 of the Decision dated
October 26, 2007 but it was denied by the CA in its
Resolution28 dated March 6, 2008.
Hence, this petition.
Issue
The lone issue to be resolved by this Court is whether the CA
erred in ruling that the donation inter vivos of Lot No. 4709 and half
of Lot No. 4706 in favor of Florante may only be rescinded if there
is already a judicial determination that the same actually belonged
to the estate of Spouses Baylon.
The Courts Ruling
The petition is partly meritorious.
Procedural Matters
Before resolving the lone substantive issue in the instant case, this
Court deems it proper to address certain procedural matters that
need to be threshed out which, by laxity or otherwise, were not
raised by the parties herein.
Misjoinder of Causes of Action
The complaint filed by the petitioners with the RTC involves two
separate, distinct and independent actions partition and
rescission. First, the petitioners raised the refusal of their co-heirs,
Florante, Rita and Panfila, to partition the properties which they
inherited from Spouses Baylon. Second, in their supplemental
pleading, the petitioners assailed the donation inter vivos of Lot
No. 4709 and half of Lot No. 4706 made by Rita in favor of
Florante pendente lite.
The actions of partition and
rescission cannot be joined in a
single action.
By a joinder of actions, or more properly, a joinder of causes of
action is meant the uniting of two or more demands or rights of
action in one action, the statement of more than one cause of
action in a declaration. It is the union of two or more civil causes of
action, each of which could be made the basis of a separate suit,
in the same complaint, declaration or petition. A plaintiff may under
certain circumstances join several distinct demands, controversies
or rights of action in one declaration, complaint or petition. 29
The objectives of the rule or provision are to avoid a multiplicity of
suits where the same parties and subject matter are to be dealt
with by effecting in one action a complete determination of all
matters in controversy and litigation between the parties involving
one subject matter, and to expedite the disposition of litigation at
minimum cost. The provision should be construed so as to avoid
such multiplicity, where possible, without prejudice to the rights of
the litigants.30
Nevertheless, while parties to an action may assert in one
pleading, in the alternative or otherwise, as many causes of action
as they may have against an opposing party, such joinder of
causes of action is subject to the condition, inter alia, that the
joinder shall not include special civil actions governed by special
rules.31
Here, there was a misjoinder of causes of action. The action for
partition filed by the petitioners could not be joined with the action
for the rescission of the said donation inter vivos in favor of
Florante. Lest it be overlooked, an action for partition is a special
civil action governed by Rule 69 of the Rules of Court while an
action for rescission is an ordinary civil action governed by the
ordinary rules of civil procedure. The variance in the procedure in
the special civil action of partition and in the ordinary civil action of
rescission precludes their joinder in one complaint or their being
tried in a single proceeding to avoid confusion in determining what
rules shall govern the conduct of the proceedings as well as in the
determination of the presence of requisite elements of each
particular cause of action.32
A misjoined cause of action, if not
severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.
Nevertheless, misjoinder of causes of action is not a ground for
dismissal. Indeed, the courts have the power, acting upon the
motion of a party to the case or sua sponte, to order the severance
of the misjoined cause of action to be proceeded with
separately.33 However, if there is no objection to the improper
joinder or the court did not motu proprio direct a severance, then
there exists no bar in the simultaneous adjudication of all the
erroneously joined causes of action. On this score, our disquisition
in Republic of the Philippines v. Herbieto34 is instructive, viz:
This Court, however, disagrees with petitioner Republic in this
regard. This procedural lapse committed by the respondents
should not affect the jurisdiction of the MTC to proceed with and
hear their application for registration of the Subject Lots.
xxxx
Considering every application for land registration filed in strict
accordance with the Property Registration Decree as a single
cause of action, then the defect in the joint application for
registration filed by the respondents with the MTC constitutes a
misjoinder of causes of action and parties. Instead of a single or
joint application for registration, respondents Jeremias and David,
more appropriately, should have filed separate applications for
registration of Lots No. 8422 and 8423, respectively.
Misjoinder of causes of action and parties do not involve a
question of jurisdiction of the court to hear and proceed with the
case. They are not even accepted grounds for dismissal thereof.
Instead, under the Rules of Court, the misjoinder of causes of
action and parties involve an implied admission of the courts
jurisdiction. It acknowledges the power of the court, acting upon
the motion of a party to the case or on its own initiative, to order
the severance of the misjoined cause of action, to be proceeded
with separately (in case of misjoinder of causes of action); and/or
the dropping of a party and the severance of any claim against
said misjoined party, also to be proceeded with separately (in case
of misjoinder of parties).35 (Citations omitted)
It should be emphasized that the foregoing rule only applies if the
court trying the case has jurisdiction over all of the causes of
action therein notwithstanding the misjoinder of the same. If the
court trying the case has no jurisdiction over a misjoined cause of
action, then such misjoined cause of action has to be severed from
the other causes of action, and if not so severed, any adjudication
rendered by the court with respect to the same would be a nullity.
Here, Florante posed no objection, and neither did the RTC direct
the severance of the petitioners action for rescission from their
action for partition. While this may be a patent omission on the part
of the RTC, this does not constitute a ground to assail the validity
and correctness of its decision. The RTC validly adjudicated the
issues raised in the actions for partition and rescission filed by the
petitioners.
Asserting a New Cause of Action in a Supplemental Pleading
In its Decision dated October 26, 2007, the CA pointed out that the
said action for rescission should have been filed by the petitioners
independently of the proceedings in the action for partition. It
opined that the action for rescission could not be lumped up with
the action for partition through a mere supplemental pleading.
We do not agree.
A supplemental pleading may raise
a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.
Section 6, Rule 10 of the Rules of Court reads:
Sec. 6. Supplemental Pleadings. Upon motion of a party the
court may, upon reasonable notice and upon such terms as are
just, permit him to serve a supplemental pleading setting forth
transactions, occurrences or events which have happened since
the date of the pleading sought to be supplemented. The adverse
party may plead thereto within ten (10) days from notice of the
order admitting the supplemental pleading.
In Young v. Spouses Sy,36 this Court had the opportunity to
elucidate on the purpose of a supplemental pleading. Thus:
As its very name denotes, a supplemental pleading only serves to
bolster or add something to the primary pleading. A supplement
exists side by side with the original. It does not replace that which
it supplements. Moreover, a supplemental pleading assumes that
the original pleading is to stand and that the issues joined with the
original pleading remained an issue to be tried in the action. It is
but a continuation of the complaint. Its usual office is to set up new
facts which justify, enlarge or change the kind of relief with respect
to the same subject matter as the controversy referred to in the
original complaint.
The purpose of the supplemental pleading is to bring into the
records new facts which will enlarge or change the kind of relief to
which the plaintiff is entitled; hence, any supplemental facts which
further develop the original right of action, or extend to vary the
relief, are available by way of supplemental complaint even though
they themselves constitute a right of action.37 (Citations omitted
and emphasis ours)
Thus, a supplemental pleading may properly allege transactions,
occurrences or events which had transpired after the filing of the
pleading sought to be supplemented, even if the said supplemental
facts constitute another cause of action.
Admittedly, in Leobrera v. Court of Appeals,38 we held that a
supplemental pleading must be based on matters arising
subsequent to the original pleading related to the claim or defense
presented therein, and founded on the same cause of action. We
further stressed therein that a supplemental pleading may not be
used to try a new cause of action.
However, in Planters Development Bank v. LZK Holdings and
Development Corp.,39 we clarified that, while a matter stated in a
supplemental complaint should have some relation to the cause of
action set forth in the original pleading, the fact that the
supplemental pleading technically states a new cause of action
should not be a bar to its allowance but only a matter that may be
considered by the court in the exercise of its discretion. In such
cases, we stressed that a broad definition of "cause of action"
should be applied.
Here, the issue as to the validity of the donation inter vivos of Lot
No. 4709 and half of Lot No. 4706 made by Rita in favor of
Florante is a new cause of action that occurred after the filing of
the original complaint. However, the petitioners prayer for the
rescission of the said donation inter vivos in their supplemental
pleading is germane to, and is in fact, intertwined with the cause of
action in the partition case. Lot No. 4709 and half of Lot No. 4706
are included among the properties that were sought to be
partitioned.
The petitioners supplemental pleading merely amplified the
original cause of action, on account of the gratuitous conveyance
of Lot No. 4709 and half of Lot No. 4706 after the filing of the
original complaint and prayed for additional reliefs, i.e., rescission.
Indeed, the petitioners claim that the said lots form part of the
estate of Spouses Baylon, but cannot be partitioned unless the
gratuitous conveyance of the same is rescinded. Thus, the
principal issue raised by the petitioners in their original complaint
remained the same.
Main Issue: Propriety of Rescission
After having threshed out the procedural matters, we now proceed
to adjudicate the substantial issue presented by the instant
petition.
The petitioners assert that the CA erred in remanding the case to
the RTC for the determination of ownership of Lot No. 4709 and
half of Lot No. 4706. They maintain that the RTC aptly rescinded
the said donation inter vivos of Lot No. 4709 and half of Lot No.
4706 pursuant to Article 1381(4) of the Civil Code.
In his Comment,40 Florante asserts that before the petitioners may
file an action for rescission, they must first obtain a favorable
judicial ruling that Lot No. 4709 and half of Lot No. 4706 actually
belonged to the estate of Spouses Baylon. Until then, Florante
avers that an action for rescission would be premature.
The petitioners contentions are well-taken.
The resolution of the instant dispute is fundamentally contingent
upon a determination of whether the donation inter vivos of Lot No.
4709 and half of Lot No. 4706 in favor of Florante may be
rescinded pursuant to Article 1381(4) of the Civil Code on the
ground that the same was made during the pendency of the action
for partition with the RTC.
Rescission is a remedy to address
the damage or injury caused to the
contracting parties or third
persons.
Rescission is a remedy granted by law to the contracting parties
and even to third persons, to secure the reparation of damages
caused to them by a contract, even if it should be valid, by means
of the restoration of things to their condition at the moment prior to
the celebration of said contract.41 It is a remedy to make ineffective
a contract, validly entered into and therefore obligatory under
normal conditions, by reason of external causes resulting in a
pecuniary prejudice to one of the contracting parties or their
creditors.42
Contracts which are rescissible are valid contracts having all the
essential requisites of a contract, but by reason of injury or
damage caused to either of the parties therein or to third persons
are considered defective and, thus, may be rescinded.
The kinds of rescissible contracts, according to the reason for their
susceptibility to rescission, are the following: first, those which are
rescissible because of lesion or prejudice;43 second, those which
are rescissible on account of fraud or bad faith;44 and third, those
which, by special provisions of law,45 are susceptible to
rescission.46
Contracts which refer to things
subject of litigation is rescissible
pursuant to Article 1381(4) of the
Civil Code.
Contracts which are rescissible due to fraud or bad faith include
those which involve things under litigation, if they have been
entered into by the defendant without the knowledge and approval
of the litigants or of competent judicial authority. Thus, Article
1381(4) of the Civil Code provides:
Art. 1381. The following contracts are rescissible:
xxxx
(4) Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and approval
of the litigants or of competent judicial authority.
The rescission of a contract under Article 1381(4) of the Civil Code
only requires the concurrence of the following: first, the defendant,
during the pendency of the case, enters into a contract which
refers to the thing subject of litigation; and second, the said
contract was entered into without the knowledge and approval of
the litigants or of a competent judicial authority. As long as the
foregoing requisites concur, it becomes the duty of the court to
order the rescission of the said contract.
The reason for this is simple. Article 1381(4) seeks to remedy the
presence of bad faith among the parties to a case and/or any
fraudulent act which they may commit with respect to the thing
subject of litigation.
When a thing is the subject of a judicial controversy, it should
ultimately be bound by whatever disposition the court shall render.
The parties to the case are therefore expected, in deference to the
courts exercise of jurisdiction over the case, to refrain from doing
acts which would dissipate or debase the thing subject of the
litigation or otherwise render the impending decision therein
ineffectual.
There is, then, a restriction on the disposition by the parties of the
thing that is the subject of the litigation. Article 1381(4) of the Civil
Code requires that any contract entered into by a defendant in a
case which refers to things under litigation should be with the
knowledge and approval of the litigants or of a competent judicial
authority.
Further, any disposition of the thing subject of litigation or any act
which tends to render inutile the courts impending disposition in
such case, sans the knowledge and approval of the litigants or of
the court, is unmistakably and irrefutably indicative of bad faith.
Such acts undermine the authority of the court to lay down the
respective rights of the parties in a case relative to the thing
subject of litigation and bind them to such determination.
It should be stressed, though, that the defendant in such a case is
not absolutely proscribed from entering into a contract which refer
to things under litigation. If, for instance, a defendant enters into a
contract which conveys the thing under litigation during the
pendency of the case, the conveyance would be valid, there being
no definite disposition yet coming from the court with respect to the
thing subject of litigation. After all, notwithstanding that the subject
thereof is a thing under litigation, such conveyance is but merely
an exercise of ownership.
This is true even if the defendant effected the conveyance without
the knowledge and approval of the litigants or of a competent
judicial authority. The absence of such knowledge or approval
would not precipitate the invalidity of an otherwise valid contract.
Nevertheless, such contract, though considered valid, may be
rescinded at the instance of the other litigants pursuant to Article
1381(4) of the Civil Code.
Here, contrary to the CAs disposition, the RTC aptly ordered the
rescission of the donation inter vivos of Lot No. 4709 and half of
Lot No. 4706 in favor of Florante. The petitioners had sufficiently
established the presence of the requisites for the rescission of a
contract pursuant to Article 1381(4) of the Civil Code. It is
undisputed that, at the time they were gratuitously conveyed by
Rita, Lot No. 4709 and half of Lot No. 4706 are among the
properties that were the subject of the partition case then pending
with the RTC. It is also undisputed that Rita, then one of the
defendants in the partition case with the RTC, did not inform nor
sought the approval from the petitioners or of the RTC with regard
to the donation inter vivos of the said parcels of land to Florante.
Although the gratuitous conveyance of the said parcels of land in
favor of Florante was valid, the donation inter vivos of the same
being merely an exercise of ownership, Ritas failure to inform and
seek the approval of the petitioners or the RTC regarding the
conveyance gave the petitioners the right to have the said
donation rescinded pursuant to Article 1381(4) of the Civil Code.
Rescission under Article 1381(4) of
the Civil Code is not preconditioned
upon the judicial determination as
to the ownership of the thing
subject of litigation.
In this regard, we also find the assertion that rescission may only
be had after the RTC had finally determined that the parcels of
land belonged to the estate of Spouses Baylon intrinsically amiss.
The petitioners right to institute the action for rescission pursuant
to Article 1381(4) of the Civil Code is not preconditioned upon the
RTCs determination as to the ownership of the said parcels of
land.
It bears stressing that the right to ask for the rescission of a
contract under Article 1381(4) of the Civil Code is not contingent
upon the final determination of the ownership of the thing subject
of litigation. The primordial purpose of Article 1381(4) of the Civil
Code is to secure the possible effectivity of the impending
judgment by a court with respect to the thing subject of litigation. It
seeks to protect the binding effect of a courts impending
adjudication vis--vis the thing subject of litigation regardless of
which among the contending claims therein would subsequently be
upheld. Accordingly, a definitive judicial determination with respect
to the thing subject of litigation is not a condition sine qua non
before the rescissory action contemplated under Article 1381(4) of
the Civil Code may be instituted.
Moreover, conceding that the right to bring the rescissory action
pursuant to Article 1381(4) of the Civil Code is preconditioned
upon a judicial determination with regard to the thing subject
litigation, this would only bring about the very predicament that the
said provision of law seeks to obviate. Assuming arguendo that a
rescissory action under Article 1381(4) of the Civil Code could only
be instituted after the dispute with respect to the thing subject of
litigation is judicially determined, there is the possibility that the
same may had already been conveyed to third persons acting in
good faith, rendering any judicial determination with regard to the
thing subject of litigation illusory. Surely, this paradoxical
eventuality is not what the law had envisioned.
Even if the donation inter vivos is
validly rescinded, a determination
as to the ownership of the subject
parcels of land is still necessary.
Having established that the RTC had aptly ordered the rescission
of the said donation inter vivos in favor of Florante, the issue that
has to be resolved by this Court is whether there is still a need to
determine the ownership of Lot No. 4709 and half of Lot No. 4706.
In opting not to make a determination as to the ownership of Lot
No. 4709 and half of Lot No. 4706, the RTC reasoned that the
parties in the proceedings before it constitute not only the surviving
heirs of Spouses Baylon but the surviving heirs of Rita as well. As
intimated earlier, Rita died intestate during the pendency of the
proceedings with the RTC without any issue, leaving the parties in
the proceedings before the RTC as her surviving heirs. Thus, the
RTC insinuated, a definitive determination as to the ownership of
the said parcels of land is unnecessary since, in any case, the said
parcels of land would ultimately be adjudicated to the parties in the
proceedings before it.
We do not agree.
Admittedly, whoever may be adjudicated as the owner of Lot No.
4709 and half of Lot No. 4706, be it Rita or Spouses Baylon, the
same would ultimately be transmitted to the parties in the
proceedings before the RTC as they are the only surviving heirs of
both Spouses Baylon and Rita. However, the RTC failed to realize
that a definitive adjudication as to the ownership of Lot No. 4709
and half of Lot No. 4706 is essential in this case as it affects the
authority of the RTC to direct the partition of the said parcels of
land. Simply put, the RTC cannot properly direct the partition of Lot
No. 4709 and half of Lot No. 4706 until and unless it determines
that the said parcels of land indeed form part of the estate of
Spouses Baylon.
It should be stressed that the partition proceedings before the RTC
only covers the properties co-owned by the parties therein in their
respective capacity as the surviving heirs of Spouses Baylon.
Hence, the authority of the RTC to issue an order of partition in the
proceedings before it only affects those properties which actually
belonged to the estate of Spouses Baylon.
In this regard, if Lot No. 4709 and half of Lot No. 4706, as
unwaveringly claimed by Florante, are indeed exclusively owned
by Rita, then the said parcels of land may not be partitioned
simultaneously with the other properties subject of the partition
case before the RTC. In such case, although the parties in the
case before the RTC are still co-owners of the said parcels of land,
the RTC would not have the authority to direct the partition of the
said parcels of land as the proceedings before it is only concerned
with the estate of Spouses Baylon.
WHEREFORE, in consideration of the foregoing disquisitions, the
petition is PARTIALLY GRANTED. The Decision dated October
26, 2007 issued by the Court of Appeals in CA-G.R. CV No. 01746
is MODIFIED in that the Decision dated October 20, 2005 issued
by the Regional Trial Court, Tanjay City, Negros Oriental, Branch
43 in Civil Case No. 11657, insofar as it decreed the rescission of
the Deed of Donation dated July 6, 1997 is herebyREINSTATED.
The case is REMANDED to the trial court for the determination of
the ownership of Lot No. 4709 and half of Lot No. 4706 in
accordance with this Decision.
SO ORDERED.
epublic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 140479 March 8, 2001
ROSENCOR DEVELOPMENT CORPORATION and RENE
JOAQUIN, petitioners,
vs.
PATERNO INQUING, IRENE GUILLERMO, FEDERICO
BANTUGAN, FERNANDO MAGBANUA and LIZZA
TIANGCO, respondents.
GONZAGA-REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court seeking reversal of the Decision1 of the Court of Appeals
dated June 25, 1999 in CA-G.R. CV No. 53963. The Court of
Appeals decision reversed and set aside the Decision2 dated May
13, 1996 of Branch 217 of the Regional Trial Court of Quezon City
in Civil Case No. Q-93-18582.1wphi1.nt
The case was originally filed on December 10, 1993 by Paterno
Inquing, Irene Guillermo and Federico Bantugan, herein
respondents, against Rosencor Development Corporation
(hereinafter "Rosencor"), Rene Joaquin, and Eufrocina de Leon.
Originally, the complaint was one for annulment of absolute deed
of sale but was later amended to one for rescission of absolute
deed of sale. A complaint-for intervention was thereafter filed by
respondents Fernando Magbanua and Danna Lizza Tiangco. The
complaint-in-intervention was admitted by the trial court in an
Order dated May 4, 1994.3
The facts of the case, as stated by the trial court and adopted by
the appellate court, are as follows:
"This action was originally for the annulment of the Deed
of Absolute Sale dated September 4, 1990 between
defendants Rosencor and Eufrocina de Leon but later
amended (sic) praying for the rescission of the deed of
sale.
Plaintiffs and plaintiffs-intervenors averred that they are
the lessees since 1971 of a two-story residential
apartment located at No. 150 Tomas Morato Ave.,
Quezon City covered by TCT No. 96161 and owned by
spouses Faustino and Cresencia Tiangco. The lease was
not covered by any contract. The lessees were renting
the premises then for P150.00 a month and were
allegedly verbally granted by the lessors the pre-emptive
right to purchase the property if ever they decide to sell
the same.
Upon the death of the spouses Tiangcos in 1975, the
management of the property was adjudicated to their
heirs who were represented by Eufrocina de Leon. The
lessees were allegedly promised the same pre-emptive
right by the heirs of Tiangcos since the latter had
knowledge that this right was extended to the former by
the late spouses Tiangcos. The lessees continued to stay
in the premises and allegedly spent their own money
amounting from P50,000.00 to P100,000.00 for its
upkeep. These expenses were never deducted from the
rentals which already increased to P1,000.00.
 In June 1990, the lessees received a letter from Atty.
Erlinda Aguila demanding that they vacate the premises
so that the demolition of the building be undertaken.
They refused to leave the premises. In that same month,
de Leon refused to accept the lessees rental payment
claiming that they have run out of receipts and that a new
collector has been assigned to receive the payments.
Thereafter, they received a letter from Eufrocina de Leon
offering to sell to them the property they were leasing for
P2,000,000.00. xxx.
The lessees offered to buy the property from de Leon for
the amount of P1,000,000.00. De Leon told them that
she will be submitting the offer to the other heirs. Since
then, no answer was given by de Leon as to their offer to
buy the property. However, in November 1990, Rene
Joaquin came to the leased premises introducing himself
as its new owner.
In January 1991, the lessees again received another
letter from Atty. Aguila demanding that they vacate the
premises. A month thereafter, the lessees received a
letter from de Leon advising them that the heirs of the
late spouses Tiangcos have already sold the property to
Rosencor. The following month Atty. Aguila wrote them
another letter demanding the rental payment and
introducing herself as counsel for Rosencor/Rene
Joaquin, the new owners of the premises.
The lessees requested from de Leon why she had
disregarded the pre-emptive right she and the late
Tiangcos have promised them. They also asked for a
copy of the deed of sale between her and the new
owners thereof but she refused to heed their request. In
the same manner, when they asked Rene Joaquin a
copy of the deed of sale, the latter turned down their
request and instead Atty. Aguila wrote them several
letters demanding that they vacate the premises. The
lessees offered to tender their rental payment to de Leon
but she refused to accept the same.
In April 1992 before the demolition can be undertaken by
the Building Official, the barangay interceded between
the parties herein after which Rosencor raised the issue
as to the rental payment of the premises. It was also at
this instance that the lessees were furnished with a copy
of the Deed of Sale and discovered that they were
deceived by de Leon since the sale between her and
Rene Joaquin/Rosencor took place in September 4, 1990
while de Leon made the offer to them only in October
1990 or after the sale with Rosencor had been
consummated. The lessees also noted that the property
was sold only for P726,000.00.
The lessees offered to reimburse de Leon the selling
price of P726,000.00 plus an additional P274,000.00 to
complete their P1,000.000.00 earlier offer. When their
offer was refused, they filed the present action praying
for the following: a) rescission of the Deed of Absolute
Sale between de Leon and Rosencor dated September
4, 1990; b) the defendants Rosencor/Rene Joaquin be
ordered to reconvey the property to de Leon; and c) de
Leon be ordered to reimburse the plaintiffs for the repairs
of the property, or apply the said amount as part of the
price for the purchase of the property in the sum of
P100,000.00."4
After trial on the merits, the Regional Trial Court rendered a
Decision5 dated May 13, 1996 dismissing the complaint. The trial
court held that the right of redemption on which the complaint. The
trial court held that the right of redemption on which the complaint
was based was merely an oral one and as such, is unenforceable
under the law. The dispositive portion of the May 13, 1996
Decision is as follows:
"WHEREFORE, in view of the foregoing, the Court
DISMISSES the instant action. Plaintiffs and plaintiffs-
intervenors are hereby ordered to pay their respective
monthly rental of P1,000.00 per month reckoned from
May 1990 up to the time they leave the premises. No
costs.
SO ORDERED."6
Not satisfied with the decision of the trial court, respondents herein
filed a Notice of Appeal dated June 3, 1996. On the same date, the
trial court issued an Order for the elevation of the records of the
case to the Court of Appeals. On August 8, 1997, respondents filed
their appellate brief before the Court of Appeals.
On June 25, 1999, the Court of Appeals rendered its
decision7 reversing the decision of the trial court. The dispositive
portion of the June 25, 1999 decision is as follows:
"WHEREFORE, premises considered, the appealed
decision (dated May 13, 1996) of the Regional Trial Court
(Branch 217) in Quezon City in Case No. Q-93-18582 is
hereby REVERSED and SET ASIDE. In its stead, a new
one is rendered ordering:
(1) The rescission of the Deed of Absolute Sale
executed between the appellees on September
4, 1990;
(2) The reconveyance of the subject premises
to appellee Eufrocina de Leon;
(3) The heirs of Faustino and Crescencia
Tiangco, thru appellee Eufrocina de Leon, to
afford the appellants thirty days within which to
exercise their right of first refusal by paying the
amount of ONE MILLION PESOS
(P1,000,000.00) for the subject property; and
(4) The appellants to, in turn, pay the appellees
back rentals from May 1990 up to the time this
decision is promulgated.
No pronouncement as to costs.
SO ORDERED".8
Petitioners herein filed a Motion for Reconsideration of the
decision of the Court of Appeals but the same was denied in a
Resolution dated October 15, 1999.9
Hence, this petition for review on certiorari where petitioners
Rosencor Development Corporation and Rene Joaquin raise the
following assignment of errors10:
I.
THE COURT OF APPEALS GRAVELY ERRED WHEN IT
ORDERED THE RESCISSION OF THE ABSOLUTE
DEED OF SALE BETWEEN EUFROCINA DE LEON
AND PETITIONER ROSENCOR.
II.
THE COURT OF APPEALS COMMTITED MANIFEST
ERROR IN MANDATING THAT EUFROCINA DE LEON
AFFORD RESPONDENTS THE OPPORTUNITY TO
EXERCISE THEIR RIGHT OF FIRST REFUSAL.
III.
 THE COURT OF APPEALS GRIEVOUSLY ERRED IN
CONCLUDING THAT RESPONDENTS HAVE
ESTABLISHED THEIR RIGHT OF FIRST REFUSAL
DESPITE PETITIONERS RELIANCE ON THEIR
DEFENSE BASED ON THE STATUTE OF FRAUDS.
Eufrocina de Leon, for herself and for the heirs of the spouses
Faustino and Crescencia Tiangco, did not appeal the decision of
the Court of Appeals.
At the onset, we not that both the Court of Appeals and the
Regional Trial Court relied on Article 1403 of the New Civil Code,
more specifically the provisions on the statute of frauds, in coming
out with their respective decisions. The trial court, in denying the
petition for reconveyance, held that right of first refusal relied upon
by petitioners was not reduced to writing and as such, is
unenforceable by virtue of the said article. The Court of Appeals,
on the other hand, also held that the statute of frauds governs the
"right of first refusal" claimed by respondents. However, the
appellate court ruled that respondents had duly proven the same
by reason of petitioners waiver of the protection of the statute by
reason of their failure to object to the presentation of oral evidence
of the said right.
Both the appellate court and the trial court failed to discuss,
however, the threshold issue of whether or not a right of first
refusal is indeed covered by the provisions of the New Civil Code
on the statute of frauds. The resolution of the issue on the
applicability of the statute of frauds is important as it will determine
the type of evidence which may be considered by the trial court as
proof of the alleged right of first refusal.
The term "statute of frauds" is descriptive of statutes which require
certain classes of contracts to be in writing. This statute does not
deprive the parties of the right to contract with respect to the
matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable. Thus, they are
included in the provisions of the New Civil Code regarding
unenforceable contracts, more particularly Art. 1403, paragraph 2.
Said article provides, as follows:
"Art. 1403. The following contracts are unenforceable,
unless they are ratified:
xxx
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
secondary evidence of its contents:
a) An agreement that by its terms is not to be
performed within a year from the making
thereof;
b) A special promise to answer for the debt,
default, or miscarriage of another;
c) An agreement made in consideration of
marriage, other than a mutual promise to marry;
d) An agreement for the sale of goods, chattels
or things in action, at a price not less than five
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the
evidences, or some of them, of such things in
action, or pay at the time some part of the
purchase money; but when a sale is made by
auction and entry is made by the auctioneer in
his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale,
price, names of purchasers and person on
whose account the sale is made, it is a
sufficient memorandum;
e) An agreement for the leasing of a longer
period than one year, or for the sale of real
property or of an interest therein;
f) A representation to the credit of a third
person."
The purpose of the statute is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the
unassisted memory of witnesses by requiring certain enumerated
contracts and transactions to be evidenced by a writing signed by
the party to be charged.11 Moreover, the statute of frauds refers to
specific kinds of transactions and cannot apply to any other
transaction that is not enumerated therein.12 The application of
such statute presupposes the existence of a perfected contract. 13
The question now is whether a "right of first refusal" is among
those enumerated in the list of contracts covered by the Statute of
Frauds. More specifically, is a right of first refusal akin to "an
agreement for the leasing of a longer period than one year, or for
the sale of real property or of an interest therein" as contemplated
by Article 1403, par. 2(e) of the New Civil Code.
We have previously held that not all agreements "affecting land"
must be put into writing to attain enforceability.14Thus, we have
held that the setting up of boundaries,15 the oral partition of real
property16, and an agreement creating a right of way17 are not
covered by the provisions of the statute of frauds. The reason
simply is that these agreements are not among those enumerated
in Article 1403 of the New Civil Code.
A right of first refusal is not among those listed as unenforceable
under the statute of frauds. Furthermore, the application of Article
1403, par. 2(e) of the New Civil Code presupposes the existence
of a perfected, albeit unwritten, contract of sale. 18 A right of first
refusal, such as the one involved in the instant case, is not by any
means a perfected contract of sale of real property. At best, it is a
contractual grant, not of the sale of the real property involved, but
of the right of first refusal over the property sought to be sold19.
It is thus evident that the statute of frauds does not contemplate
cases involving a right of first refusal. As such, a right of first
refusal need not be written to be enforceable and may be proven
by oral evidence.
The next question to be ascertained is whether or not respondents
have satisfactorily proven their right of first refusal over the
property subject of the Deed of Absolute Sale dated September 4,
1990 between petitioner Rosencor and Eufrocina de Leon.
On this point, we agree with the factual findings of the Court of
Appeals that respondents have adequately proven the existence of
their right of first refusal. Federico Bantugan, Irene Guillermo, and
Paterno Inquing uniformly testified that they were promised by the
late spouses Faustino and Crescencia Tiangco and, later on, by
their heirs a right of first refusal over the property they were
currently leasing should they decide to sell the same. Moreover,
respondents presented a letter20 dated October 9, 1990 where
Eufrocina de Leon, the representative of the heirs of the spouses
Tiangco, informed them that they had received an offer to buy the
disputed property for P2,000,000.00 and offered to sell the same
to the respondents at the same price if they were interested. Verily,
if Eufrocina de Leon did not recognize respondents right of first
refusal over the property they were leasing, then she would not
have bothered to offer the property for sale to the respondents.
It must be noted that petitioners did not present evidence before
the trial court contradicting the existence of the right of first refusal
of respondents over the disputed property. They only presented
petitioner Rene Joaquin, the vice-president of petitioner Rosencor,
who admitted having no personal knowledge of the details of the
sales transaction between Rosencor and the heirs of the spouses
Tiangco21. They also dispensed with the testimony of Eufrocina de
Leon22 who could have denied the existence or knowledge of the
right of first refusal. As such, there being no evidence to the
contrary, the right of first refusal claimed by respondents was
substantially proven by respondents before the lower court.
Having ruled upon the question as to the existence of respondents
right of first refusal, the next issue to be answered is whether or
not the Court of Appeals erred in ordering the rescission of the
Deed of Absolute Sale dated September 4, 1990 between
Rosencor and Eufrocina de Leon and in decreeing that the heirs of
the spouses Tiangco should afford respondents the exercise of
their right of first refusal. In other words, may a contract of sale
entered into in violation of a third partys right of first refusal be
rescinded in order that such third party can exercise said right?
The issue is not one of first impression.
In Guzman, Bocaling and Co, Inc. vs. Bonnevie23, the Court upheld
the decision of a lower court ordering the rescission of a deed of
sale which violated a right of first refusal granted to one of the
parties therein. The Court held:
"xxx Contract of Sale was not voidable but rescissible.
Under Article 1380 to 1381 (3) of the Civil Code, a
contract otherwise valid may nonetheless be
subsequently rescinded by reason of injury to third
persons, like creditors. The status of creditors could be
validly accorded the Bonnevies for they had substantial
interests that were prejudiced by the sale of the subject
property to the petitioner without recognizing their right of
first priority under the Contract of Lease.
According to Tolentino, rescission is a remedy granted by
law to the contracting parties and even to third persons,
to secure reparations for damages caused to them by a
contract, even if this should be valid, by means of the
restoration of things to their condition at the moment prior
to the celebration of said contract. It is a relief allowed for
the protection of one of the contracting parties and even
third persons from all injury and damage the contract
may cause, or to protect some incompatible and
preferent right created by the contract. Rescission
implies a contract which, even if initially valid, produces a
lesion or pecuniary damage to someone that justifies its
invalidation for reasons of equity.
It is true that the acquisition by a third person of the
property subject of the contract is an obstacle to the
action for its rescission where it is shown that such third
person is in lawful possession of the subject of the
contract and that he did not act in bad faith. However,
this rule is not applicable in the case before us because
the petitioner is not considered a third party in relation to
the Contract of Sale nor may its possession of the
subject property be regarded as acquired lawfully and in
good faith.
Indeed, Guzman, Bocaling and Co. was the vendee in
the Contract of Sale. Moreover, the petitioner cannot be
deemed a purchaser in good faith for the record shows
that it categorically admitted that it was aware of the
lease in favor of the Bonnevies, who were actually
occupying the subject property at the time it was sold to
it. Although the occupying the subject property at the time
it was sold to it. Although the Contract of Lease was not
annotated on the transfer certificate of title in the name of
the late Jose Reynoso and Africa Reynoso, the petitioner
cannot deny actual knowledge of such lease which was
equivalent to and indeed more binding than presumed
notice by registration.
A purchaser in good faith and for value is one who buys
the property of another without notice that some other
person has a right to or interest in such property without
and pays a full and fair price for the same at the time of
such purchase or before he has notice of the claim or
interest of some other person in the property. Good faith
connotes an honest intention to abstain from taking
unconscientious advantage of another. Tested by these
principles, the petitioner cannot tenably claim to be a
buyer in good faith as it had notice of the lease of the
property by the Bonnevies and such knowledge should
have cautioned it to look deeper into the agreement to
determine if it involved stipulations that would prejudice
its own interests."
Subsequently24 in Equatorial Realty and Development, Inc. vs.
Mayfair Theater, Inc.25, the Court, en banc, with three justices
dissenting,26 ordered the rescission of a contract entered into in
violation of a right of first refusal. Using the ruling in Guzman
Bocaling & Co., Inc. vs. Bonnevie as basis, the Court decreed that
since respondent therein had a right of first refusal over the said
property, it could only exercise the said right if the fraudulent sale
is first set aside or rescinded. Thus:
"What Carmelo and Mayfair agreed to, by executing the
two lease contracts, was that Mayfair will have the right
of first refusal in the event Carmelo sells the leased
premises. It is undisputed that Carmelo did recognize this
right of Mayfair, for it informed the latter of its intention to
sell the said property in 1974. There was an exchange of
letters evidencing the offer and counter-offers made by
both parties. Carmelo, however, did not pursue the
exercise to its logical end. While it initially recognized
Mayfairs right of first refusal, Carmelo violated such right
when without affording its negotiations with Mayfair the
full process to ripen to at least an interface of a definite
offer and a possible corresponding acceptance within the
"30-day exclusive option" time granted Mayfair, Carmelo
abandoned negotiations, kept a low profile for some time,
and then sold, without prior notice to Mayfair, the entire
Claro M. Recto property to Equatorial.
Since Equatorial is a buyer in bad faith, this finding
renders the sale to it of the property in question,
rescissible. We agree with respondent Appellate Court
that the records bear out the fact that Equatorial was
aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such,
Equatorial cannot tenably claim that to be a purchaser in
good faith, and, therefore, rescission lies.
XXX
As also earlier emphasized, the contract of sale between
Equatorial and Carmelo is characterized by bad faith,
since it was knowingly entered into in violation of the
rights of and to the prejudice of Mayfair. In fact, as
correctly observed by the Court of Appeals, Equatorial
admitted that its lawyers had studied the contract or
lease prior to the sale. Equatorials knowledge of the
stipulations therein should have cautioned it to look
further into the agreement to determine if it involved
stipulations that would prejudice its own interests.
Since Mayfair had a right of first refusal, it can exercise
the right only if the fraudulent sale is first set aside or
rescinded. All of these matters are now before us and so
there should be no piecemeal determination of this case
and leave festering sores to deteriorate into endless
litigation. The facts of the case and considerations of
justice and equity require that we order rescission here
and now. Rescission is a relief allowed for the protection
of one of the contracting parties and even third persons
from all injury and damage the contract may cause or to
protect some incompatible and preferred right by the
 contract. The sale of the subject real property should now
be rescinded considering that Mayfair, which had
substantial interest over the subject property, was
prejudiced by the sale of the subject property to
Equatorial without Carmelo conferring to Mayfair every
opportunity to negotiate within the 30-day stipulate
periond.27
In Paranaque Kings Enterprises, Inc. vs. Court of Appeals,28 the
Court held that the allegations in a complaint showing violation of a
contractual right of "first option or priority to buy the properties
subject of the lease" constitute a valid cause of action enforceable
by an action for specific performance. Summarizing the rulings in
the two previously cited cases, the Court affirmed the nature of
and concomitant rights and obligations of parties under a right of
first refusal. Thus:
"We hold however, that in order to have full compliance
with the contractual right granting petitioner the first
option to purchase, the sale of the properties for the
amount of P9,000,000.00, the price for which they were
finally sold to respondent Raymundo, should have
likewise been offered to petitioner.
The Court has made an extensive and lengthy discourse
on the concept of, and obligations under, a right of first
refusal in the case of Guzman, Bocaling & Co. vs.
Bonnevie. In that case, under a contract of lease, the
lessees (Raul and Christopher Bonnevie) were given a
"right of first priority" to purchase the leased property in
case the lessor (Reynoso) decided to sell. The selling
price quoted to the Bonnevies was 600,000.00 to be fully
paid in cash, less a mortgage lien of P100,000.00. On
the other hand, the selling price offered by Reynoso to
and accepted by Guzman was only P400,000.00 of
which P137,500.00 was to be paid in cash while the
balance was to be paid only when the property was
cleared of occupants. We held that even if the Bonnevies
could not buy it at the price quoted (P600,000.00),
nonetheless, Reynoso could not sell it to another for a
lower price and under more favorable terms and
conditions without first offering said favorable terms and
price to the Bonnevies as well. Only if the Bonnevies
failed to exercise their right of first priority could Reynoso
thereafter lawfully sell the subject property to others, and
only under the same terms and conditions previously
offered to the Bonnevies.
XXX
This principle was reiterated in the very recent case
of Equatorial Realty vs. Mayfair Theater, Inc. which was
decided en banc. This Court upheld the right of first
refusal of the lessee Mayfair, and rescinded the sale of
the property by the lessor Carmelo to Equatorial Realty
"considering that Mayfair, which had substantial interest
over the subject property, was prejudiced by its sale to
Equatorial without Carmelo conferring to Mayfair every
opportunity to negotiate within the 30-day stipulated
period"
In that case, two contracts of lease between Carmelo
and Mayfair provided "that if the LESSOR should desire
to sell the leased premises, the LESSEE shall be given
30 days exclusive option to purchase the same."
Carmelo initially offered to sell the leased property to
Mayfair for six to seven million pesos. Mayfair indicated
interest in purchasing the property though it invoked the
30-day period. Nothing was heard thereafter from
Carmelo. Four years later, the latter sold its entire Recto
Avenue property, including the leased premises, to
Equatorial for P11,300,000.00 without priorly informing
Mayfair. The Court held that both Carmelo and Equatorial
acted in bad faith: Carmelo or knowingly violating the
right of first option of Mayfair, and Equatorial for
purchasing the property despite being aware of the
contract stipulation. In addition to rescission of the
contract of sale, the Court ordered Carmelo to allow
Mayfair to buy the subject property at the same price of
P11,300,000.00.
In the recent case of Litonjua vs L&R Corporation,29 the Court, also
citing the case of Guzman, Bocaling & Co. vs. Bonnevie, held that
the sale made therein in violation of a right of first refusal
embodied in a mortgage contract, was rescissible. Thus:
"While petitioners question the validity of paragraph 8 of
their mortgage contract, they appear to be silent insofar
as paragraph 9 thereof is concerned. Said paragraph 9
grants upon L&R Corporation the right of first refusal over
the mortgaged property in the event the mortgagor
decides to sell the same. We see nothing wrong in this
provision. The right of first refusal has long been
recognized as valid in our jurisdiction. The consideration
for the loan mortgage includes the consideration for the
right of first refusal. L&R Corporation is in effect stating
that it consents to lend out money to the spouses
Litonjua provided that in case they decide to sell the
property mortgaged to it, then L&R Corporation shall be
given the right to match the offered purchase price and to
buy the property at that price. Thus, while the spouses
Litonjua had every right to sell their mortgaged property
to PWHAS without securing the prior written consent of
L&R Corporation, they had the obligation under
paragraph 9, which is a perfectly valid provision, to notify
the latter of their intention to sell the property and give it
priority over other buyers. It is only upon the failure of
L&R Corporation to exercise its right of first refusal could
the spouses Litonjua validly sell the subject properties to
the others, under the same terms and conditions offered
to L&R Corporation.
What then is the status of the sale made to PWHAS in
violation of L & R Corporations contractual right of first
refusal? On this score, we agree with the Amended
Decision of the Court of Appeals that the sale made to
PWHAS is rescissible. The case of Guzman, Bocaling &
Co. v. Bonnevie is instructive on this point.
XXX
It was then held that the Contract of Sale there, which
violated the right of first refusal, was rescissible.
In the case at bar, PWHAS cannot claim ignorance of the
right of first refusal granted to L & R Corporation over the
subject properties since the Deed of Real Estate
Mortgage containing such a provision was duly
registered with the Register of Deeds. As such, PWHAS
is presumed to have been notified thereof by registration,
which equates to notice to the whole world.
XXX
All things considered, what then are the relative rights
and obligations of the parties? To recapitulate: the sale
between the spouses Litonjua and PWHAS is valid,
notwithstanding the absence of L & R Corporations prior
written consent thereto. Inasmuch as the sale to PWHAS
was valid, its offer to redeem and its tender of the
redemption price, as successor-in-interest of the spouses
Litonjua, within the one-year period should have been
accepted as valid by the L & R Corporation. However,
while the sale is, indeed, valid, the same is rescissible
because it ignored L & R Corporations right of first
refusal."
Thus, the prevailing doctrine, as enunciated in the cited cases, is
that a contract of sale entered into in violation of a right of first
refusal of another person, while valid, is rescissible.
There is, however, a circumstance which prevents the application
of this doctrine in the case at bench. In the cases cited above, the
Court ordered the rescission of sales made in violation of a right of
first refusal precisely because the vendees therein could not have
acted in good faith as they were aware or should have been aware
of the right of first refusal granted to another person by the vendors
therein. The rationale for this is found in the provisions of the New
Civil Code on rescissible contracts. Under Article 1381 of the New
Civil Code, paragraph 3, a contract validly agreed upon may be
rescinded if it is "undertaken in fraud of creditors when the latter
cannot in any manner collect the claim due them." Moreover, under
Article 1385, rescission shall not take place "when the things which
are the object of the contract are legally in the possession of third
persons who did not act in bad faith."30
It must be borne in mind that, unlike the cases cited above, the
right of first refusal involved in the instant case was an oral one
given to respondents by the deceased spouses Tiangco and
subsequently recognized by their heirs. As such, in order to hold
that petitioners were in bad faith, there must be clear and
convincing proof that petitioners were made aware of the said right
of first refusal either by the respondents or by the heirs of the
spouses Tiangco.
It is axiomatic that good faith is always presumed unless contrary
evidence is adduced.31 A purchaser in good faith is one who buys
the property of another without notice that some other person has
a right or interest in such a property and pays a full and fair price at
the time of the purchase or before he has notice of the claim or
interest of some other person in the property.32 In this regard, the
rule on constructive notice would be inapplicable as it is
undisputed that the right of first refusal was an oral one and that
the same was never reduced to writing, much less registered with
the Registry of Deeds. In fact, even the lease contract by which
respondents derive their right to possess the property involved was
an oral one.
On this point, we hold that the evidence on record fails to show
that petitioners acted in bad faith in entering into the deed of sale
over the disputed property with the heirs of the spouses Tiangco.
Respondents failed to present any evidence that prior to the sale
of the property on September 4, 1990, petitioners were aware or
had notice of the oral right of first refusal.
Respondents point to the letter dated June 1, 199033 as indicative
of petitioners knowledge of the said right. In this letter, a certain
Atty. Erlinda Aguila demanded that respondent Irene Guillermo
vacate the structure they were occupying to make way for its
demolition.
We fail to see how the letter could give rise to bad faith on the part
of the petitioner. No mention is made of the right of first refusal
granted to respondents. The name of petitioner Rosencor or any of
it officers did not appear on the letter and the letter did not state
that Atty. Aguila was writing in behalf of petitioner. In fact, Atty.
Aguila stated during trial that she wrote the letter in behalf of the
heirs of the spouses Tiangco. Moreover, even assuming that Atty.
Aguila was indeed writing in behalf of petitioner Rosencor, there is
no showing that Rosencor was aware at that time that such a right
of first refusal existed.
Neither was there any showing that after receipt of this June 1,
1990 letter, respondents notified Rosencor or Atty. Aguila of their
right of first refusal over the property. Respondents did not try to
communicate with Atty. Aguila and inform her about their
preferential right over the disputed property. There is even no
showing that they contacted the heirs of the spouses Tiangco after
they received this letter to remind them of their right over the
property.
Respondents likewise point to the letter dated October 9, 1990 of
Eufrocina de Leon, where she recognized the right of first refusal
of respondents, as indicative of the bad faith of petitioners. We do
not agree. Eufrocina de Leon wrote the letter on her own behalf
and not on behalf of petitioners and, as such, it only shows that
Eufrocina de Leon was aware of the existence of the oral right of
first refusal. It does not show that petitioners were likewise aware
of the existence of the said right. Moreover, the letter was made a
month after the execution of the Deed of Absolute Sale on
September 4, 1990 between petitioner Rosencor and the heirs of
the spouses Tiangco. There is no showing that prior to the date of
the execution of the said Deed, petitioners were put on notice of
the existence of the right of first refusal.
Clearly, if there was any indication of bad faith based on
respondents evidence, it would only be on the part of Eufrocina de
Leon as she was aware of the right of first refusal of respondents
yet she still sold the disputed property to Rosencor. However, bad
faith on the part of Eufrocina de Leon does not mean that
petitioner Rosencor likewise acted in bad faith. There is no
showing that prior to the execution of the Deed of Absolute Sale,
petitioners were made aware or put on notice of the existence of
the oral right of first refusal. Thus, absent clear and convincing
evidence to the contrary, petitioner Rosencor will be presumed to
have acted in good faith in entering into the Deed of Absolute Sale
over the disputed property.
Considering that there is no showing of bad faith on the part of the
petitioners, the Court of Appeals thus erred in ordering the
rescission of the Deed of Absolute Sale dated September 4, 1990
between petitioner Rosencor and the heirs of the spouses Tiangco.
The acquisition by Rosencor of the property subject of the right of
first refusal is an obstacle to the action for its rescission where, as
in this case, it was shown that Rosencor is in lawful possession of
the subject of the contract and that it did not act in bad faith. 34
This does not mean however that respondents are left without any
remedy for the unjustified violation of their right of first refusal.
Their remedy however is not an action for the rescission of the
Deed of Absolute Sale but an action for damages against the heirs
of the spouses Tiangco for the unjustified disregard of their right of
first refusal35.
WHEREFORE, premises considered, the decision of the Court of
Appeals dated June 25, 1999 is REVERSED and SET ASIDE. The
Decision dated May 13, 1996 of the Quezon City Regional Trial
Court, Branch 217 is hereby REINSTATED insofar as it dismisses
the action for rescission of the Deed of Absolute Sale dated
September 4, 1990 and orders the payment of monthly rentals of
P1,000.00 per month reckoned from May 1990 up to the time
respondents leave the premises.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 180269 February 20, 2013
JOSE Z. CASILANG, SR., substituted by his heirs, namely:
FELICIDAD CUD lAMA T VDA. DE CASILANG, JOSE C.
CASILANG, JR., RICARDO C. CASILANG, MARIA LOURDES C.
CASILANG, CHRISTOPHER C. CASILANG, BEN C. CASILANG,
DANTE C. CASILANG, GREGORIO C. CASILANG, HERALD C.
CASILANG; and FELICIDAD Z. CASILANG, MARCELINA Z.
CASILANG, JACINTA Z. CASILANG, BONIFACIO Z.
CASILANG, LEONORA Z. CASILANG, and FLORA Z.
CASILANG, Petitioners,
vs.
ROSARIO Z. CASILANG-DIZON, MARIO A. CASILANG,
ANGELO A. CASILANG, RODOLFO A. CASILANG, and ATTY.
ALICIA B. FABIA, in her capacity as Clerk of Court and Ex-
Officio Sheriff of Pangasinan and/or her duly authorized
representative, Respondents.
 DECISION
REYES, J.:
Before us is a petition for review of the Decision1 dated July 19,
2007 of the Court of Appeals (CA) in CA-G.R. CV No. 79619,
which reversed and set aside the Decision2 dated April 21, 2003 of
the Regional Trial Court (RTC) of Dagupan City, Branch 41, in Civil
Case No. 98-02371-D.
Antecedent Facts
The late spouses Liborio Casilang (Liborio) and Francisca
Zacarias (Francisca) had eight (8) children, namely: Felicidad
Casilang (Felicidad), Ireneo Casilang (Ireneo), Marcelina Casilang
(Marcelina), Jacinta Casilang (Jacinta), Bonifacio Casilang
(Bonifacio), Leonora Casilang (Leonora), Jose Casilang (Jose) and
Flora Casilang (Flora). Liborio died intestate on October 11, 1982
at the age of 83, followed not long after by his wife Francisca on
December 25, 1982. Their son Bonifacio also died in 1986,
survived by his child Bernabe Casilang (Bernabe), while son
Ireneo died on June 11, 1992, survived by his four (4) children,
namely: Mario Casilang (Mario), Angelo Casilang (Angelo),
Rosario Casilang-Dizon (Rosario) and Rodolfo Casilang (Rodolfo),
herein respondents.
The estate of Liborio, which left no debts, consisted of three (3)
parcels of land located in Barangay Talibaew, Calasiao,
Pangasinan, namely: (1) Lot No. 4676, with an area of 4,164
square meters; (2) Lot No. 4704, containing 1,164 sq m; and (3)
Lot No. 4618, with 897 sq m.
On May 26, 1997, respondent Rosario filed with the Municipal Trial
Court (MTC) of Calasiao, Pangasinan a complaint for unlawful
detainer, docketed as Civil Case No. 847, to evict her uncle,
petitioner Jose from Lot No. 4618. Rosario claimed that Lot No.
4618 was owned by her father Ireneo, as evidenced by Tax
Declaration (TD) No. 555 issued in 1994 under her fathers name.
On April 3, 1997, the respondents executed a Deed of Extrajudicial
Partition with Quitclaim3 whereby they adjudicated Lot No. 4618 to
themselves. In the same instrument, respondents Mario, Angelo
and Rodolfo renounced their respective shares in Lot No. 4618 in
favor of Rosario.
In his Answer, Jose raised the defense that he was the "lawful,
absolute, exclusive owner and in actual possession" of the said lot,
and that he acquired the same "through intestate succession from
his late father."4For some reason, however, he and his lawyer, who
was from the Public Attorneys Office, failed to appear at the
scheduled pre-trial conference, and Jose was declared in default;
thus, the adverse judgment against him.5
On February 18, 1998, the MTC rendered judgment finding
Rosario to be the owner of Lot No. 4618, and ordering Jose to
remove his house, vacate Lot No. 4618, and pay Rosario P500.00
in monthly rentals from the filing of the complaint until she was
placed in possession, plus attorneys fees of P5,000.00, litigation
expenses and costs. On March 23, 1998, the MTC issued a writ of
execution; and on August 28, 1998, a Writ of Demolition 6was
issued.
On June 2, 1998, the petitioners, counting 7 of the 8 children of
Liborio and Francisca,7 filed with the RTC of Dagupan City a
Complaint,8 docketed as Civil Case No. 98-02371-D for
"Annulment of Documents, Ownership and Peaceful Possession
with Damages" against the respondents. On June 10, 1998, the
petitioners moved for the issuance of a writ of preliminary
injunction or temporary restraining order, which the RTC however
denied on June 23, 1998.
Among the documents sought to be annulled was the 1997 Deed
of Extrajudicial Partition executed by Ireneos children over Lot No.
4618, as well as TD No. 555, and by necessary implication its
derivatives, TD No. 15177 (for the lot) and TD No. 15176 (for the
house), both of which were issued in 1998 in the name of Rosario
Casilang-Dizon.9
The petitioners alleged in their complaint that all eight (8) children
of Liborio entered into a verbal partition of his estate, pursuant to
which Jose was allotted Lot No. 4618 as his share; that Ireneo
never claimed ownership of Lot No. 4618, nor took possession of
it, because his share was the southwestern 1/5 portion of Lot No.
4676, containing an area of 1,308 sq m,10 of which he took
exclusive possession during his lifetime; that Jose has always
resided in Lot No. 4618 since childhood, where he built his familys
semi-concrete house just a few steps away from his parents old
bamboo hut; that he took in and cared for his aged parents in his
house until their deaths in 1982; that one of his children has also
built a house on the lot.11 Jose, said to be the most educated of the
Casilang siblings, worked as an insurance agent.12 The complete
disposition of the intestate estate of Liborio per the parties verbal
partition appears as follows:
1. Lot No. 4676, with 4,164 sq m, declared under TD No.
534 in Liborios name,13 was verbally partitioned among
Marcelina (236 sq m), Leonora (1,965 sq m), Flora (655
sq m), and Ireneo, represented by his children, the herein
respondents-defendants (1,308 sq m), as shown in
a Deed of Extrajudicial Partition with Quitclaim dated
January 8, 1998, subsequently executed by all the
Casilang siblings and their representatives.
2. Lot No. 4704, with 1,164 sq m, declared under TD No.
276 in Liborios name,14 was divided among Jacinta and
Bonifacio, who died in 1986 and is now represented by
his son Bernabe; and
3. Lot No. 4618, containing 897 sq m, declared since
1994 under TD No. 555 in Ireneos name,15 is now the
subject of the controversy below. Jose insists that he
succeeded to it per verbal partition, and that he and his
family have always occupied the same peacefully,
adversely and exclusively even while their parents were
alive.16
For her part, Rosario alleged in her answer with
counterclaim,17 which she filed on September 15, 1998, that:
a) She is the actual and lawful owner of Lot No. 4618
with an area of 897 square meters, having acquired the
same by way of a Deed of Extra judicial Partition with
Quitclaim dated 3 April 1997 which was duly executed
among herein Appellant ROSARIO and her brothers,
namely, MARIO, ANGELO and RODOLFO, all surnamed
CASILANG;
b) Her ownership over subject property could be traced
back to her late father IR[E]NEO which the latter
inherited by way of intestate succession from his
deceased father LIBORIO sometime in 1992; that the
residential house described in herein Appellee JOSEs
complaint is an illegal structure built by him in 1997
without her (ROSARIOs) knowledge and consent; that in
fact, an ejectment suit was filed against Appellee JOSE
with the Municipal Trial Court in Calasiao, Pangasinan in
Civil Case No. 847;
c) The subject lot is never a portion of Appellee JOSEs
share from the intestate of his deceased father,
LIBORIO; that on the contrary, the lot is his deceased
brother IR[E]NEOs share from the late LIBORIOs
intestate estate; that in fact, the property has long been
declared in the name of the late IRENEO as shown by
Tax Declaration No. 555 long before his children
ROSARIO DIZON, MARIO, ANGELO and RODOLFO, all
surnamed CASILANG, executed the Deed of Partition
dated 18 February 1998; that Appellee JOSE had
actually consumed his shares which he inherited from his
late father, and after a series of sales and dispositions of
 the same made by him, he now wants to take Appellants
property;
d) Appellee JOSE is never the rightful owner of the lot in
question and has not shown any convincing proof of his
supposed ownership; that the improvements introduced
by him, specifically the structures he cited are the subject
of a Writ of Demolition dated 28 August 1998 pursuant to
the Order dated 17 August 1998 of the MTC of Calasiao,
Pangasinan;
e) No protestation or objection was ever made by
Appellee JOSE in Civil Case No. 847 (Unlawful
Detainercase) where he was the defendant; that the truth
was that his possession of the subject property was upon
the tolerance and benevolence of his late brother
IRENEO during the latters lifetime and that Appellant
ROSARIO;
f) The RTC Clerk of Court and Ex-officio Provincial
Sheriff would just be doing her job if she and her
deputies would implement the writ of
execution/demolition issued by the MTC of Calasiao,
Pangasinan since it is its ministerial duty to do so;
g) The Appellees have no cause of action; not having
shown in their complaint the basis, the reason and the
very core of their claim as to why the questioned
document should be nullified.18 (Citation omitted)
In their reply19 to Rosarios aforesaid answer, the petitioners
asserted that the MTC committed a grave error in failing to
consider a material fact-that Jose had long been in prior
possession under a claim of title which he obtained by partition.
At the pre-trial conference in Civil Case No. 98-02371-D, the
parties entered into the following stipulations:
1. That the late LIBORIO is the father of FELICIDAD,
MARCELINA, JUANITA, LEONORA, FLORA and
IRENEO, all surnamed CASILANG;
2. That the late LIBORIO died in 1982; That the late
LIBORIO and his family resided on Lot [No.] 4618 up to
his death in 1982; That the house of the late LIBORIO is
located on Lot [No.] 4618;
3. That Plaintiff JOSE used to reside on the lot in
question because there was a case for ejectment filed
against him;
4. That the house which was demolished is the family
house of the late LIBORIO and FRANCISCA ZACARIAS
with the qualification that it was given to the defendants;
5. That the action involves members of the same family;
and
6. That no earnest efforts were made prior to the
institution of the case in court.20
Ruling of the RTC
After a full trial on the merits, the RTC in its Decision21 dated April
21, 2003 decreed as follows:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiffs and against the defendants as follows:
1. Declaring the Deed of Extrajudicial Partition with
Quitclaim dated April 3, 1997 null and void;
2. Declaring plaintiff Jose Z. Casilang Sr. as the lawful
owner and possessor of the subject Lot No. 4618 and as
such, entitled to the peaceful possession of the same;
3. Ordering the defendants to pay to plaintiff Jose Z.
Casilang Sr. attorneys fees in the amount ofP20,000.00
and litigation expenses in the amount of P5,000.00, and
to pay the costs of suit.
SO ORDERED.22
The RTC affirmed Joses ownership and possession of Lot No.
4618 by virtue of the oral partition of the estate of Liborio by all the
siblings. In the Deed of Extrajudicial Partition with
Quitclaim23 dated January 8, 1998, subsequently executed by all
the eight (8) Casilang siblings and their legal representativeswith
Ireneo represented by his four (4) children, and Bonifacio by his
son Bernabepetitioners Jose, Felicidad, Jacinta and Bernabe,
acknowledged that they had already received their respective
shares of inheritance in advance,"24 and
therefore, renounced their claims over Lot No. 4676 in favor of co-
heirs Marcelina, Leonora, Flora and Ireneo, as follows:
We hereby RENOUNCED, WAIVED AND QUITCLAIM, all our
rights, interests and participations over the WHOLE parcel of land
[Lot No. 4676], left by the late, LIBORIO CASILANG, in favor of
our coheirs, namely: MARCELINA Z. CASILANG-PARAYNO,
LEONORA Z. CASILANG-SARMIENTO, FLORA Z. CASILANG,
MARIO A. CASILANG, ANGELO A. CASILANG, ROSARIO A.
CASILANGDIZON AND RODOLFO A. CASILANG.25
Thus, Jose expressly renounced his share in Lot No. 4676, which
has an area of 4,164 sq m, because he had already received in
advance his share in his fathers estate, Lot No. 4618 with 897 sq
m:
To the mind of the court, Jose Casilang could have not [sic]
renounced and waived his rights and interests over Lot [No.] 4676
if he believes that Lot [No.] 4618 is not his, while the other lot, Lot
[No.] 470[4], was divided between sister Jacinta Casilang and
brother Bonifacio Casilang[,] Sr., who was represented by his son.
In the same [way] as testified to by plaintiffs Felicidad Casilang
and Jacinta Casilang, they signed the Deed of Extrajudicial
Partition with Quitclaim wherein they waived and renounced their
rights and interests over Lot [No.] 4676 because they have already
received their share, which is Lot [No.] 470[4].26
The RTC found baseless the claim of Rosario that Lot No. 4618
was an inheritance of her father Ireneo considering that a tax
declaration is not conclusive proof of ownership. The RTC even
noted that the tax declaration of Ireneo started only in 1994,
although he had been dead since 1992. "Such being the case, the
heirs of Ir[e]neo Casilang has [sic] no basis in adjudicating unto
themselves Lot No. 4618 and partitioning the same by executing
the Deed of Extrajudicial Partition with Quitclaim."27
Appeal to the CA
Undeterred, Rosario appealed to the CA averring that: (1) the
lower court erred in declaring the Deed of Extrajudicial Partition
with Quitclaim dated April 3, 1997 as null and void; and (2) the
lower court erred in declaring Jose as the lawful owner and
possessor of the subject Lot No. 4618.28
In the now assailed decision, the CA reversed the RTC by relying
mainly on the factual findings and conclusions of the MTC in Civil
Case No. 847, viz:
Per the records, the above described property was subject of Civil
Case No. 847 decided by the MTC of Calasiao, First Judicial
Region, Province of Pangasinan which rendered a
judgment, supra, in favor of Appellant ROSARIO ordering herein
Appellee JOSE and all persons claiming rights under him to vacate
the land of Appellant ROSARIO. It was found by the MTC that the
latter is the owner of the subject parcel of land located at Talibaew,
Calasiao, Pangasinan; that the former owner of the land is the late
IRENEO (who died on 11 June 1992), father of Appellant
ROSARIO; that Extra Judicial Partition with Quitclaim was
executed by and among the heirs of the late IRENEO; that
MAURO [sic], ANGELO and RODOLFO, all surnamed CASILANG
waived and quitclaimed their respective shares over the subject
property in favor of Appellant ROSARIO; that Appellee JOSE was
allowed by the late IRENEO during his lifetime to occupy a portion
of the land without a contract of lease and no rentals being paid by
the former; that Appellant ROSARIO allowed Appellee JOSE to
continue occupying the land after the Extra Judicial Partition with
Quitclaim was executed.29
Moreover, noting that the decision in Civil Case No. 847 in favor of
Rosario was issued on February 18, 1998 while the petitioners
complaint in Civil Case No. 98-02371-D was filed on June 2, 1998,
the CA concluded that the latter case was a mere afterthought:
If the latter has really a strong and valid reason to question the
validity of the Deed of Extra Judicial Partition with Quitclaim, supra,
he could have done it soon after the said Deed was executed on 3
April 1997. However, curiously enough, it was only when the MTC
ordered his eviction from the subject property that he decided to
file the instant case against the Appellants.30
Petition for Review in the Supreme Court
Now in this petition for review on certiorari, petitioners maintain
that:
IN UPHOLDING THE LEGALITY [OF] THE DEED OF
EXTRAJUDICIAL PARTITION AND QUITCLAIM DATED APRIL 3,
1997, THE HONORABLE COURT OF APPEALS GROSSLY
VIOLATED THE SUBSTANTIVE RIGHT OF JOSE Z. CASILANG,
SR. AS DIRECT COMPULSORY HEIR.31
Our Ruling and Discussions
There is merit in the petition.
Inferior courts are empowered to rule on the question of
ownership raised by the defendant in an ejectment suit, but
only to resolve the issue of possession; its determination is
not conclusive on the issue of ownership.
It is well to be reminded of the settled distinction between a
summary action of ejectment and a plenary action for recovery of
possession and/or ownership of the land. What really distinguishes
an action for unlawful detainer from a possessory action (accion
publiciana) and from a reinvindicatory action (accion
reinvindicatoria) is that the first is limited to the question
of possession de facto. Unlawful detainer suits (accion interdictal)
together with forcible entry are the two forms of ejectment suit that
may be filed to recover possession of real property. Aside from the
summary action of ejectment, accion publiciana or the plenary
action to recover the right of possession and accion
reinvindicatoria or the action to recover ownership which also
includes recovery of possession, make up the three kinds of
actions to judicially recover possession.32
Under Section 3 of Rule 70 of the Rules of Court, the Summary
Procedure governs the two forms of ejectment suit, the purpose
being to provide an expeditious means of protecting actual
possession or right to possession of the property. They are not
processes to determine the actual title to an estate. If at all, inferior
courts are empowered to rule on the question of ownership raised
by the defendant in such suits, only to resolve the issue of
possession and its determination on the ownership issue is not
conclusive.33 As thus provided in Section 16 of Rule 70:
Sec. 16. Resolving defense of ownership.When the defendant
raises the defense of ownership in his pleadings and the question
of possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to
determine the issue of possession.
It is apropos, then, to note that in contrast to Civil Case No. 847,
which is an ejectment case, Civil Case No. 98-02371-D is for
"Annulment of Documents, Ownership and Peaceful Possession;"
it is an accion reinvindicatoria, or action to recover ownership,
which necessarily includes recovery of possession34 as an incident
thereof. Jose asserts his ownership over Lot No. 4618 under a
partition agreement with his co-heirs, and seeks to invalidate
Ireneos "claim" over Lot No. 4618 and to declare TD No. 555 void,
and consequently, to annul the Deed of Extrajudicial Partition and
Quitclaim executed by Ireneos heirs.
It is imperative to review the CAs factual conclusions since
they are entirely contrary to those of the RTC, they have no
citation of specific supporting evidence, and are premised on
the supposed absence of evidence, particularly on the parties
verbal partition, but are directly contradicted by the evidence
on record.
It must be noted that the factual findings of the MTC, which the CA
adopted without question, were obtained through Summary
Procedure and were based solely on the complaint and affidavits
of Rosario, after Jose had been declared in default. But since a full
trial was had in Civil Case No. 98-02371-D, the CA should have
pointed out the specific errors and weaknesses in the RTCs
factual conclusions before it could rule that Jose was unable to
present "any evidentiary support" to establish his title, and that his
continued possession of Lot No. 4618 was by mere tolerance of
Rosario. At most, however, the CA only opined that it was
conjectural for the RTC to conclude, that Jose had already
received his inheritance when he renounced his share in Lot No.
4676. It then ruled that the RTC erred in not considering the
findings of the MTC in Civil Case No. 847-that Joses possession
over subject property was by mere tolerance. Said the appellate
court:
Given the claim of the Appellee that Lot [No.] 4618
was orally given/assigned to him by his deceased father LIBORIO,
or that his claim was corroborated by his sisters (his co-plaintiffs-
Appellees), or that their claim is indubitably tied up with the Deed
of Extrajudicial Partition with Quitclaim over Lot No. 4676, still We
cannot fully agree with the pronouncement of the court a quo that
Appellee JOSE could not have renounced and waived his rights
and interest over Lot [No.] 4676 if he believes that Lot [No.] 4618 is
not his. Wanting any evidentiary support, We find this stance as
conjectural being unsubstantiated by law or convincing evidence.
At the most and taking the factual or legal circumstances as shown
by the records, We hold that the court a quo erred in not
considering the findings of the MTC in Civil Case No. 847 ruling
that herein Appellee JOSEs possession over subject property was
by mere tolerance. Based as it is on mere tolerance, Appellee
JOSEs possession therefore could not, in any way, ripen into
ownership.35 (Citations omitted)
By relying solely on the MTCs findings, the CA completely ignored
the testimonial, documentary and circumstantial evidence of the
petitioners, obtained by the RTC after a full trial on the merits.
More importantly, the CA did not point to any evidence of Rosario
that Ireneo had inherited Lot No. 4618 from Liborio. All it did was
adopt the findings of the MTC.
The Supreme Court is not a trier of facts, and unless the case falls
under any of the well-defined exceptions, the Supreme Court will
not delve once more into the findings of facts. In Sps. Sta. Maria v.
CA,36 this Court stated:
Settled is the rule that the jurisdiction of this Court in cases brought
before it from the Court of Appeals via Rule 45 of the Rules of
Court is limited to reviewing errors of law. Findings of fact of the
latter are conclusive, except in the following instances: (1) when
the findings are grounded entirely on speculation, surmises, or
conjectures; (2) when the inference made is manifestly mistaken,
absurd, or impossible; (3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when in making its
findings the Court of Appeals went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant
and the appellee; (7) when the findings are contrary to those of the
trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondent; and (10) when the
findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record.37 (Citation
omitted)
In the instant case, the factual findings of the CA and the RTC are
starkly contrasting. Moreover, we find that the CA decision falls
under exceptions (7), (8) and (10) above, which warrants another
review of its factual findings.
The evidence supporting Rosarios claim of sole ownership of Lot
No. 4618 is the Deed of Extrajudicial Partition with Quitclaim,
which she executed with her brothers Mario, Angelo and Rodolfo.
There is no question that by itself, the said document would have
fully conveyed to Rosario whatever rights her brothers might have
in Lot No. 4618. But what needs to be established first is whether
or not Ireneo did in fact own Lot No. 4618 through succession, as
Rosario claims. And here now lies the very crux of the controversy.
A review of the parties evidence shows that they entered into
an oral partition, giving Lot No. 4618 to Jose as his share,
whereas Rosario presented no proof whatsoever that her
father inherited Lot No. 4618 from his father Liborio.
Rosarios only proof of Ireneos ownership is TD No. 555, issued in
his name, but she did not bother to explain why it was dated 1994,
although Ireneo died on June 11, 1992. Liborios ownership of Lot
No. 4618 is admitted by all the parties, but it must be asked
whether in his lifetime Liborio did in fact transmit it to Ireneo, and if
not, whether it was conveyed to him by Liborios heirs. It is
imperative for Rosario to have presented proof of this transfer to
Ireneo, in such a form as would have vested ownership in him. We
find, instead, a preponderance of contrary evidence.
1. In his testimony, Jose claimed that his parents
bamboo house in Lot No. 4618 disintegrated from wear
and tear; so he took them in to his semi-concrete house
in the same lot, which was just a few steps away, and he
cared for them until they died; shortly before Liborios
death, and in the presence of all his siblings, his father
Liborio assigned Lot No. 4618 to him as his inheritance;
his house was demolished in 1998 as a result of the
ejectment case filed against him; but his family continued
to live thereat after reconstructing the house; Ireneo and
his family did not live in Lot No. 4618; although Joses job
as an insurance agent took him around Pangasinan, he
always came home to his family in his house in Lot No.
4618, which he used as his permanent address; only Lot
No. 4676 was included in the Deed of Extrajudicial
Partition dated January 8, 1998 because Lot No. 4618
had already been distributed to Jose, and Lot No. 4704
had already been assigned to Jacinta and Bonifacio as
their share in their fathers estate.38
2. Joses testimony was corroborated by petitioners
Felicidad,39 Jacinta,40 Leonora,41 and Flora,42 who all
confirmed that their brother Jose has always resided in
Lot No. 4618 from his childhood up to the present, that
he took their aged parents into his house after their
bamboo house was destroyed, and he attended to their
needs until they died in 1982. The sisters were also one
in saying that their father Liborio verbally willed Lot No.
4618 to Jose as his share in his estate, and that their
actual partition affirmed their fathers dispositions. Jacinta
claimed that she and Bonifacio have since taken
possession of Lot No. 4704 pursuant to their partition,
and have also declared their respective portions for tax
purposes.43 Flora corroborated Jacinta on their taking
possession of Lot No. 4704, as well as that Jose built his
house on Lot No. 4618 next to his parents and they came
to live with him in their old age. Flora affirmed that Exhibit
"F" correctly reflects their verbal partition of Lot No. 4676,
and that she was fully in accord with it. She added that
Felicidad and Marcelina had since constructed their own
houses on the portions of Lot No. 4676 assigned to
them.44 Felicidad mentioned that in their partition, Ireneo
was given a portion of Lot No. 4676, while Lot No. 4704
was divided between Jacinta and Bonifacio, and Jose
alone got Lot No. 4618. Leonora confirmed that they
were all present when their father made his above
dispositions of his estate.
3. Benjamin Lorenzo, a long-time neighbor of the
Casilangs testified that Joses house stands on Lot No.
4618 and Ireneo did not live with his family on the said lot
but was a tenant in another farm some distance away.45
4. For her part, Rosario merely asserted that her father
Ireneo succeeded to Lot No. 4618 from Liborio, as shown
in TD No. 555 (Exhibit "1"); that she and her brothers
extra-judicially settled Ireneos estate, and that they each
waived their shares in her favor; and, that she has been
paying taxes on Lot No. 4618. Rosario admitted,
however, that Jose has lived in the lot since he was a
child, and he has reconstructed his house thereon after
its court-ordered demolition.46 But Rosario on cross-
examination backtracked by claiming that it was her
father Ireneo and grandfather Liborio who built the old
house in Lot No. 4618, where Ireneo resided until his
death; he even planted various fruit trees. Yet, there is no
mention whatsoever to this effect by any of the
witnesses. Rosario also contradicted herself when she
denied that Jose lived there because his job as insurance
agent took him away often and yet admitted that Joses
house stands there, which he reconstructed after it was
ordered demolished by the MTC. Inexplicably, Rosario
disclaimed knowledge of Ireneos share in Lot No. 4676,
although she was a signatory, along with her brothers
and all the petitioners, in the deed of partition of the said
lot, whereby she got 1,308 sq m. Rosario also admitted
that taxes were paid on the lot only beginning in 1997,
not before.47
5. Benjamin Dizon, husband of Rosario, testified that
Rosario was losing appetite and sleep because of the
case filed by Jose; that Ireneo died in another farm; that
Ireneo had a house in Lot No. 4618 but Jose took over
the house after he died in 1992.48 Respondent Angelo,
brother of Rosario, claimed that when he was 13 or 14
years old, he heard his grandfather tell his father Ireneo
that he would inherit Lot No. 4618. On cross-
examination, Angelo insisted that his father had always
lived with his family in his grandfathers house in Lot No.
4618, that Jose did not live there but was given another
lot, although he could not say which lot it was; he
admitted that his grandmother lived with Jose when she
died, and Ireneos share was in Lot No. 4676.49
6. On rebuttal, Jose recounted that after his four children
were married, Ireneo lived as a tenant in another farm;
that during a period of illness he lived in Manila for some
time, and later resided in Cagayan with his two married
sons; and lastly on his return, worked as a tenant of the
Maningding family for about 10 years in Calasiao, staying
in a hut one kilometer away. Jose also claimed that
Ireneo had asked Liborio for a portion of Lot No. 4676, a
lot which is bigger than Lot No. 4618 by several
hundreds of square meters.50
7. On sur-rebuttal, Rosario claimed that her
grandparents, father and mother lived in Lot No. 4618
when she was a child until she married and left in 1976;
that her uncle Jose asked permission from Liborio to be
 allowed to stay there with his family. She admitted that
Jose built his house in 1985, three years after Liborio
died, but as if to correct herself, she also claimed that
Jose built his house in Lot No. 4676, and notin Lot No.
4618. (Contrarily, her aunt Leonora testified that Jose
built his house in Lot No. 4618 while their parents were
alive.)51 Moreover, if such was the case, Rosario did not
explain why she filed Civil Case No. 847, if she thought
her uncle built his house in Lot No. 4676, and not in Lot
No. 4618.52 Rosario also claimed that Ireneo always
came home in the evenings to his father Liborios house
from the Maningding farm, which he tenanted for 10
years, but obviously, by then Liborios house had long
been gone. Again, confusedly, Rosario denied that she
knew of her fathers share in Lot No. 4676.
From the testimonies of the parties, we are convinced that the
conclusion of the RTC is well-supported that there was indeed a
verbal partition among the heirs of Liborio, pursuant to which each
of his eight children received his or her share of his estate, and
that Joses share was Lot No. 4618.
The parties verbal partition is valid, and has been ratified by
their taking possession of their respective shares.
The validity of an oral partition is well-settled in our jurisdiction.
In Vda. de Espina v. Abaya,53 this Court declared that an oral
partition is valid:
Anent the issue of oral partition, We sustain the validity of said
partition. "An agreement of partition may be made orally or in
writing. An oral agreement for the partition of the property owned in
common is valid and enforceable upon the parties. The Statute of
Frauds has no operation in this kind of agreements, for partition is
not a conveyance of property but simply a segregation and
designation of the part of the property which belong to the co-
owners."54
In Maestrado v. CA,55 the Supreme Court upheld the partition after
it found that it conformed to the alleged oral partition of the heirs,
and that the oral partition was confirmed by the notarized
quitclaims executed by the heirs subsequently.56 In Maglucot-Aw v.
Maglucot,57 the Supreme Court elaborated on the validity of parol
partition:
On general principle, independent and in spite of the statute of
frauds, courts of equity have enforce [sic] oral partition when it has
been completely or partly performed.
Regardless of whether a parol partition or agreement to partition is
valid and enforceable at law, equity will [in] proper cases, where
the parol partition has actually been consummated by the taking of
possession in severalty and the exercise of ownership by the
parties of the respective portions set off to each, recognize and
enforce such parol partition and the rights of the parties
thereunder. Thus, it has been held or stated in a number of cases
involving an oral partition under which the parties went into
possession, exercised acts of ownership, or otherwise partly
performed the partition agreement, that equity will confirm such
partition and in a proper case decree title in accordance with the
possession in severalty.
In numerous cases it has been held or stated that parol partition
may be sustained on the ground of estoppel of the parties to assert
the rights of a tenant in common as to parts of land divided by
parol partition as to which possession in severalty was taken and
acts of individual ownership were exercised. And a court of equity
will recognize the agreement and decree it to be valid and effectual
for the purpose of concluding the right of the parties as between
each other to hold their respective parts in severalty.
A parol partition may also be sustained on the ground that the
parties thereto have acquiesced in and ratified the partition by
taking possession in severalty, exercising acts of ownership with
respect thereto, or otherwise recognizing the existence of the
partition.
A number of cases have specifically applied the doctrine of part
performance, or have stated that a part performance is necessary,
to take a parol partition out of the operation of the statute of frauds.
It has been held that where there was a partition in fact between
tenants in common, and a part performance, a court of equity
would have regard to and enforce such partition agreed to by the
parties.58
Joses possession of Lot No. 4618 under a claim of ownership is
well borne out by the records. It is also consistent with the claimed
verbal partition with his siblings, and fully corroborated by his
sisters Felicidad, Jacinta, Leonora, and Flora, who further testified
that they each had taken possession of their own shares and built
their houses thereon.
A possessor of real estate property is presumed to have title
thereto unless the adverse claimant establishes a better
right.59 Moreover, under Article 541 of the Civil Code, one who
possesses in the concept of owner has in his favor the legal
presumption that he possesses with a just title, and he cannot be
obliged to show or prove it. Similarly, Article 433 of the Civil Code
provides that actual possession under a claim of ownership raises
a disputable presumption of ownership. Thus, actual possession
and exercise of dominion over definite portions of the property in
accordance with an alleged partition are considered strong proof of
an oral partition60 which the Court will not hesitate to uphold.
Tax declarations and tax receipts are not conclusive evidence
of ownership.
It is settled that tax declarations and tax receipts alone are not
conclusive evidence of ownership. They are merely indicia of a
claim of ownership,61 but when coupled with proof of actual
possession of the property, they can be the basis of claim of
ownership through prescription.62 In the absence of actual, public
and adverse possession, the declaration of the land for tax
purposes does not prove ownership.63 We have seen that there is
no proof that Liborio, or the Casilang siblings conveyed Lot No.
4618 to Ireneo. There is also no proof that Ireneo himself declared
Lot No. 4618 for tax purposes, and even if he or his heirs did, this
is not enough basis to claim ownership over the subject property.
The Court notes that TO No. 555 was issued only in 1994, two
years after Ireneo's death. Rosario even admitted that she began
paying taxes only in 1997.64 More impmiantly, Ireneo never claimed
Lot No. 4618 nor took possession of it in the concept of owner.
WHEREFORE, premises considered, the Petition
is GRANTED. The Decision dated July 19, 2007 of the Court of
Appeals in CA-G.R. CV No. 79619 is hereby REVERSED and
SET ASIDE, and the Decision dated April 21, 2003 of the Regional
Trial Court of Dagupan City, Branch 41 in Civil Case No. 98-02371-
D is REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 109803 April 20, 1998
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
THE COURT OF APPEALS and OLYMPIA FERNANDEZ-PUEN,
respondents.

PUNO, J.:
The present case arose from a complaint for "Nullification of
Real Estate Mortgage" 1 filed by private respondent Olympia
Fernandez-Puen against her estranged husband, Chee Puen,
and petitioner Philippine Bank of Communications before the
Regional Trial Court of Pasig.
Private respondent is the president and majority stockholder
of Global, Inc., a 100% Filipino corporation engaged selling
pharmaceutical products, hospital equipment and supplies.
Her husband, Chee Puen, used to be its General Manager.
They have been living separately from each other prior to the
present controversy. She resides in Timog Avenue, Quezon
City, while he lives in Bel-Air Village, Makati.
The records show that on April 25, 1978, Chee Puen, then the
general manager of Global, Inc., informed respondent that
their company needed a three hundred thousand peso
(P300,000.00) loan for its operational expenses. He proposed
that her paraphernalia lot in Makati be used as
collateral. 2Respondent hesitated as she was afraid they would
not be able to pay the loan. He assured her that the loan
would not exceed P300,000.00 and she was asked to sign
three (3) sets of blank forms of real estate mortgage (REM) of
petitioner bank. He wrote down in pencil the figure 300 under
the space provided for the amount to be loaned and indicated
with checkmarks the spaces where respondent should sign.
Respondent signed the blank mortgage forms due to Chee
Puen's representation. Chee Puen had the mortgage
document later notarized by Atty. Edilberto Arzadon, using a
residence certificate bearing respondent's forged signature.
It appears that Chee Puen then applied for a three million
peso (P3,000,000.00) loan from petitioner bank for Global, Inc.
To secure the loan, he mortgaged respondent's paraphernal
lot in Makati, using the blank real estate mortgage forms
signed by her. He also submitted a "Secretary's certificate of
Board Resolution" (marked as Exhibit "H") where he
misrepresented himself as president and acting corporate
secretary of Global, Inc. 3
It is established that petitioner bank did not investigate Chee
Puen's authority to mortgage respondent's property.
Respondent's signature in her residence certificate was not
verified. Neither was the verity of the "Secretary's Certificate
of Board Resolution" (Exh. "H") ascertained. The three-million
peso (P3,000,000.00) loan was approved without undergoing
the usual bank procedure.
Three (3) years later, in February 1981, respondent and Chee
Puen had a quarrel because respondent refused to give the
cash allegedly needed for Global, Inc. Chee Puen threatened
respondent to leave their company. A special meeting of
Global's board of directors was called and it passed a
resolution replacing Chee Puen as official signatory of its
checks.
On February 16, 1981, respondent personally delivered a copy
of the board resolution to the Buendia branch of petitioner
bank. On the occasion, respondent chanced upon Chee Puen
while encashing two (2) checks for Global, Inc. Respondent
tore the checks into pieces (Exhibits "E" and "F") as he has
been disauthorized to manage the company. When Chee Puen
left, the teller informed respondent that Chee Puen had
obtained a loan of P3,000,000.00 from the bank.
After further investigation, respondent filed this case against
Chee Puen and petitioner to nullify the subject mortgage
deed. In her complaint, respondent alleged that she did not
authorize Chee Puen to mortgage her property to secure the
aforesaid P3 M loan. She claimed that her residence
certificate used to notarize the mortgage application form was
spurious.
At the trial, respondent presented Francisco Cruz, Jr.,
Supervising Document Examiner of the PC-CIS Crime
Laboratory, to prove that she signed the subject mortgage
forms in blank. Cruz testified that the subject mortgage
contract, consisting of one (1) original and two (2) duplicate
original copies, contained respondent's genuine signatures,
but the signatures were affixed before the typewritten entries
therein were prepared. He disclosed, further, that
respondent's alleged signature on the residence certificate
presented to notary public Arzadon differed from
respondent's specimen signatures. He opined that it was
written by another person.
For its part, petitioner bank maintained that respondent and
Chee Puen went to its office in April, 1978 to apply for the
loan. She accomplished and signed the mortgage contract in
its office and, afterwards, had it notarized by Atty. Arzadon in
the presence of witnesses.
On May 30, 1986, the trial court rendered judgment in favor of
respondent. The relevant portion of its decision 4 provides:
Considering that defendant Chee C. Puen has been
guilty of bad faith and defendant Philippine Bank of
Communications of gross negligence amounting to
bad faith (See Soberano vs. Manila Railroad Co., L-
19407, November 23, 1966, 18 SCRA 732, 738), which
compelled the plaintiff to incur expenses to protect
her interest, plaintiff is entitled to an award of
attorney's fees and expenses of litigation. (Article
2208, pars. (2) and (5), New Civil Code).
IN VIEW OF ALL THE FOREGOING, the Court
judgment in favor of plaintiff and against defendants
Philippine Bank of Communications and Chee C.
Puen, declaring the real estate mortgage (Exhs. C-3
and 4 PB Com) null and void; ordering defendant
Philippine Bank of Communications to deliver the
owner's duplicate copy of TCT No. (97379) S-4748 of
the Province of Rizal to the plaintiff; and the Register
of Deeds of Rizal (Makati branch) to cancel the
subject real estate mortgage in favor of Philippine
Bank of Communications upon plaintiff's payment of
the prescribed fees.
The defendants are ordered to pay plaintiff, jointly
and severally, the amount of Fifty Thousand Pesos
(P50,000.00), for and as attorney's fees and expenses
of litigation.
The counterclaims of defendants are dismissed for
lack of merit.
SO ORDERED.
On November 20, 1992, the Court of Appeals 5 modified the
decision of the trial court, thus:
WHEREFORE, the decision under appeal should be,
as it is hereby, affirmed in all its aspects except that
the portion of the judgment ordering defendants to
pay plaintiff jointly and severally the amount of
P50,000.00 for attorney's fees and expenses of
litigation should be, as it is hereby, deleted
therefrom.
SO ORDERED.
Hence, this petition where it is contended:
 1. The Honorable Court of Appeals erred in affirming
the nullification of the subject real estate mortgage
by the lower court.
2. The Honorable Court of Appeals erred in affirming
the ruling of the lower court that the respondent was
not estopped/barred from questioning the
legality/validity of the real state mortgage.
3. The Honorable Court of Appeals erred in affirming
the ruling of the lower court that the petitioner is not
entitled to its compulsory counterclaim.
We reject the first contention. The private respondent proved
that it was not her intent to mortgage her lot to secure a P3 M
loan of Global, Inc. Chee Puen misrepresented to her that the
loan would be no more than P300,000.00. Due to her trust on
Chee Puen, she signed the mortgage application in blank.
Chee Puen then applied for a P3 M loan. He had the mortgage
application notarized using a forged residence certificate of
the respondent. He also submitted to the petitioner bank a
"Secretary's Certificate of Board Resolution" where he falsely
stated that he was President and Acting Corporate Secretary
of Global, Inc.
The testimony of the private respondent is well corroborated
by other evidence. Mr. Francisco Cruz, Supervising Document
Examiner of the PC-CIS Crime Laboratory found and
concluded that "the three (3) questioned handwritten
signatures of Olympia Fernandez-Puen appearing in the real
estate mortgage document were signed before the typewritten
entries were prepared" (Exh. "N", "N-2"). The same official
also found that the "questioned signature of Olympia
Fernandez-Puen appearing in the Residence Certificate No.
00019600 when compared with her standard signatures were
written by two different persons" (Exh. "T", "T-2"). There is no
doubt also that Chee Puen was never the President of Global,
Inc. and hence the "Secretary's Certificate of Board
Resolution" to that effect is false and fraudulent. In light of
these established facts, it is futile for petitioner bank to insist
that the real estate mortgage contract should not be nullified.
Respondent has not consented to collateralize Global, Inc.'s
P3 M loan with her paraphernal land.
We also reject petitioner's plea that the equitable principle of
estoppel 6 be applied against the respondent. Article 1431
provides that "through estoppel, an admission or
representation is rendered conclusive upon the person
making it and cannot be denied or disproved as against the
person relying thereon." Implementing this substantive law,
section 2 (a) of Rule 131 provides: "Whenever a party has by
his own declaration, act or omission, intentionally and
deliberately led another to believe a particular thing true, and
to act upon such belief, he cannot, in any litigation arising out
of such declaration, act or omission be permitted to falsify it."
By its incorporation in the Civil Code, estoppel in our
jurisdiction has become an equitable defense that is both
substantive and remedial. Its successful invocation can
therefore bar a right and not merely its equitable enforcement.
Case law tells us that the elements of estoppel are: "first, the
actor who usually must have knowledge, notice or suspicion
of the true facts, communicates something to another in a
misleading way, either by words, conduct or silence; second,
the other in fact relies, and relies reasonably or justifiably,
upon that communication; third, the other would be harmed
materially if the actor is later permitted to assert any claim
inconsistent with his earlier conduct; and fourth, the actor
knows, expects or foresees that the other would act upon the
information given or that a reasonable person in the actor's
position would expect or foresee such action." 7
The established facts preclude the application of estoppel
against the respondent. Respondent did not deliberately or
intentionally lead the petitioner bank to believe that she was
putting up her paraphernal property to secure a P3 M loan of
Global, Inc. It was Chee Puen who made the
misrepresentation thus defrauding respondent herself.
Furthermore, petitioner's reliance on the mortgage application
signed in blank by respondent is not a reasonable reliance. As
a banking institution, petitioner bank was grossly negligent
when (a) it took no step to verify whether the respondent was
really offering her paraphernal property as collateral; (b) made
no credit check on respondent and Global, Inc.; and (c)
conducted no investigation on the authenticity of the
"Secretary's Certificate of Board Resolution" dated April 27,
1978. The business of a bank is affected with public interest
and it should observe a higher standard of diligence when
dealing with the public. Neither will it matter that petitioner
bank itself was misled by Chee Puen, a third person to the
contract. Under Article 1342 of the Civil Code, the
misrepresentation of a third person will vitiate consent if it
has resulted in substantial mistake and the same is mutual.
We cannot also subscribe to the proposition of petitioner
bank that we apply the equitable defense of laches against the
respondent. In Chung Ka Bio v. IAC, 8 we held that unlike the
statute of limitation, laches does not involve mere lapse or
passage of time but is principally an impediment to the
assertion or enforcement of a right which has become under
the circumstances inequitable or unfair to permit. Its essential
elements are: (1) conduct on the part of defendant or one
under whom he claims, giving rise to the situation complained
of; (2) delay in asserting complainant's right after he had
knowledge of the defendant's conduct and after he has an
opportunity to sue; (3) lack of knowledge or notice on the part
of the defendant that the complainant would assert the right
on which he bases his suit; (4) injury or prejudice to the
defendant in the event relief is accorded to the complainant..
Unlike estoppel, laches as an equitable defense usually bars
only the equitable enforcement of a right but not the right
itself. It is an affirmative defense and the burden of proving it
rests on the defendant. 9
In the case at bar, the evidence does not show the lapse of an
unreasonable length of time before the respondent sued to
annul the real estate mortgage of her property to the
petitioner bank. Respondent discovered the fraud perpetrated
by Chee Puen only on February 16, 1981. On this date,
respondent went to the Buendia branch of petitioner bank to
submit the board resolution of Global, Inc., replacing Chee
Puen as check signatory. She saw him still encashing checks
of the corporation and they had a confrontation. She was later
informed by the bank cashier of the P3 M loan negotiated by
Chee Puen. Respondent promptly investigated the
unauthorized loan. As soon as the investigation was
completed, respondent filed a criminal case for falsification
against Chee Puen, a disbarment complaint against Atty.
Edilberto Arzadon who notarized the mortgage deed, an
administrative complaint in the Central Bank against the
petitioner and a complaint for nullification of Real Estate
Mortgage in the RTC of Pasig, Metro Manila. These prompt
and decisive actions on the part of the respondent do not
warrant the assumption that she has abandoned or declined
to assert her right to annul the subject real estate mortgage.
Her complaint for annulment cannot by any stretch of the
imagination be characterized as a stale demand.
IN VIEW WHEREOF, the petition is dismissed. Costs against
petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 145849. July 22, 2005
SPOUSES JOSE BEJOC and JOVITA CAPUTOL
BEJOC, Petitioners,
vs.
PRIMA CALDERON CABREROS and COURT OF
APPEALS, Respondents.
DECISION
CORONA, J.:
Assailed in this petition for review under Rule 45 of the Rules of
Court1 are the decision2 and resolution3 of the Court of
Appeals4 which affirmed the trial courts judgment5 declaring
respondent the lawful owner of two parcels of agricultural land, the
subject of this petition.
The original owner of the disputed parcels of land was Maura
Caputol, the mother-in-law of respondent. On November 7, 1975,
Maura Caputol executed a deed of donation inter vivos in favor of
her son, Domingo Cabreros. The latter accepted the donation in
the same instrument.
Domingo and his wife, respondent Prima Cabreros, took physical
possession of the lots. In 1976, they had the tax declarations in the
name of Maura Caputol cancelled and transferred to them.6
When the new owners and Maura Caputol migrated to Hawaii,
they left the charge and administration of the land to petitioner
spouses. Aside from being the uncle and aunt of Domingo, they
were chosen as caretakers because they had been the overseers
of the properties even before the donation to Domingo.
As caretakers, the petitioners were tasked to deliver the harvest to
Lucinda Calderon,7 the mother of respondent Prima Calderon
Cabreros. They were also responsible for paying the taxes due
thereon, to be taken from the proceeds of the sale of the crops.
When Domingo died in Hawaii in 1979, his forced heirs,
respondent Prima and a minor daughter, succeeded to his estate. 8
Sometime in October 1989, respondent Prima made a visit to the
Philippines and went to Danao City, Cebu. She heard rumors that
petitioner spouses were exercising acts of ownership over the
disputed land. With her mother-in law Maura Caputol, she
confronted petitioners about the rumors but the latter initially
denied the accusations. Later on, however, they claimed that
Maura Caputol gave the properties to them, an allegation
disclaimed by Maura who said it was no longer possible for her to
give the properties to her younger sister, petitioner Jovita, because
she had already donated them to her son Domingo in 1975.
Respondent also found out that petitioners stopped delivering the
harvest to her mother since 1984. Moreover, she discovered that in
1981, Tax Declaration (TD) No. 19470 in the name of Domingo
Cabreros issued in 1980 for the first parcel of land (parcel 1) was
mysteriously cancelled and changed by TD No. 25472. This new
tax declaration was issued in the name of Maura Caputol on the
basis of a quitclaim allegedly executed before notary public
Leonardo Garcillano in 1971, annotated therein. The same thing
happened to the second parcel of land (parcel 2). The property
was declared in the name of Domingo Cabreros in 1980 under TD
No. 19471. Yet, in 1983, this TD was cancelled and changed by TD
No. 25473 issued in the name of Maura Caputol, based on the
same quitclaim.
In 1984, TD No. 25472 for parcel 1 and TD No. 25473 for parcel 2,
both in the name of Maura Caputol, were cancelled by TD No.
24007 and 15-26009, respectively. These new declarations were
now in the name of petitioner Jovita Caputol, based on a deed of
confirmation of sale dated May 18, 1984 annotated therein. This
document was allegedly executed by Maura Caputol in favor of
petitioner Jovita.
Respondent further found that the petitioner spouses applied for a
free patent on the properties. On October 17, 1984, Original
Certificate of Title (OCT) No. 26947 was issued to petitioner Jose
Bejoc by virtue of free patent no. (VII-5)17844 which he was able
to obtain.
Earnest efforts to have the controversy settled out of court were
unsuccessful as petitioners even dared respondent to sue them in
court. Consequently, the respondent filed an action for
reconveyance against the petitioner spouses on February 1, 1990
before Branch 17, Regional Trial Court (RTC) of Cebu.
In their answer, petitioners alleged that they had been in
possession of the parcels of land as administrators since 1974 and
as absolute owners since 1978. They claimed that Maura Caputol
never donated the parcels of land to her son Domingo.
On December 24, 1978, Maura Caputol allegedly sold the subject
properties to petitioners for P5,000 in a deed of sale. This sale was
later on confirmed in another document dated May 18, 1984. From
then on, they exercised their rights as owners of the land and paid
the taxes due beginning 1979. They also successfully applied for a
free patent on the properties. In 1984, they were issued an original
certificate of title.
Lastly, they contended that, even assuming the truth of
respondents allegations, the action for reconveyance was already
barred by prescription.
From the evidence adduced, the trial court ruled:
WHEREFORE, premises considered, judgment is rendered for the
plaintiff and against the defendants hereby declaring the plaintiff as
the true, absolute and lawful owner of the two parcels of land in
question; ordering the defendants to reconvey the aforesaid
properties in favor of the plaintiff; ordering the defendants to jointly
and severally pay plaintiff the sum of Three Thousand (P3,000.00)
Pesos a year from 1978 with legal rate of interest until the two
parcels of land shall have been reconveyed and delivered to the
plaintiff plus costs of this action.9
The Court of Appeals affirmed the trial courts judgment in a
decision dated September 20, 1999.10 The motion for
reconsideration was likewise denied on October 13, 2000.11
Hence, petitioner spouses are now before us via a petition for
review under Rule 45 of the Revised Rules of Court.
The sole issue raised in this petition is whether or not respondents
action for reconveyance has prescribed.
Petitioner spouses contend that respondents action for
reconveyance was based on fraud, not implied trust, as found by
the trial and appellate courts. Respondents allegation was that
petitioner spouses conspired to transfer the tax declarations in
their names and obtained title for the parcels of land by fabricating
the quitclaim, contract of sale and deed of confirmation of sale.
Since the fraud committed by petitioners not implied trust
was the basis of the action, the prescriptive period was 4 years
and not 10 years as enunciated in Millena v. Court of
Appeals.12 This period should be reckoned either from the time that
petitioners committed unequivocal acts of repudiation in 1978 or
from the time the OCT was issued in their names in 1984.
Considering that more than four years had passed in either case, it
was clear error for the Court of Appeals to hold that respondents
action for reconveyance had not yet prescribed when it was filed in
1990.
We find no merit in the petition.
An implied trust is one that, without being express, is deducible
from the nature of the transaction as a matter of intent or which is
superinduced on the transaction by operation of law as a matter of
equity, independently of the particular intention of the parties. 13 It
may either be resulting or constructive trust.
A resulting trust is presumed to have been contemplated by the
parties, the intention as to which is to be found in the nature of
their transaction but not expressed in the deed itself.14 It is based
on the equitable doctrine that valuable consideration, not legal title,
determines the equitable title or interest.15
A constructive trust is created, not by any word evincing a direct
intention to create a trust, but by operation of law in order to satisfy
the demands of justice and to prevent unjust enrichment. It arises
contrary to an agreement or intention against one who, by fraud,
duress or abuse of confidence, obtains or holds the legal right to
property which he ought not, in equity and good conscience, to
hold.16 A constructive trust is illustrated in Article 1456 of the Civil
Code:
ARTICLE 1456. If the property is acquired through mistake or
fraud, the person obtaining it is by force of law, considered a
trustee of an implied trust for the benefit of the person from whom
the property comes.
It is on this ground that we find no error in the trial and appellate
courts findings that an implied trust was created in favor of
respondent when petitioners transferred the properties to their
names in violation of the trust placed in them as overseers.
Records show that, while the properties were under their
administration, they transferred the tax declarations in the name of
Domingo Cabreros to Maura Caputol on the basis of a fake
quitclaim purportedly executed in 1971. These tax declarations
were in turn transferred to petitioner Jovita Caputol on the strength
of a fraudulent deed of confirmation of sale supposedly executed
by Maura Caputol on May 18, 1984.
All these documents, including a deed of sale allegedly executed
in 1978, were denounced as spurious by Maura Caputol. She
explained that she had donated the properties to her only son
Domingo Cabreros on November 7, 1975. There was no way she
could have sold these properties thereafter, considering that she
no longer owned them. Also, at the time of the alleged confirmation
of sale, Maura Caputol was already 78 years old and living alone.
At that age, she could have been easily manipulated by her sister,
petitioner Jovita, into signing just about any document.
Telling is her testimony regarding the deed of confirmation of sale:
Q: Now Mrs. Caputol, I will show to you this document evidencing
the confirmation of sale from you to your sister. In fact they have
the signature of Maura Caputol marked on their exhibit. Can you
identify that signature?
A: I signed the document just to confirm that they are the one
staying [in] the house and over-seeing the property and I did not
sell the property and in fact I even wanted to buy some
more.17 (emphasis ours)
Moreover, the quitclaim and the deed of sale, upon which
petitioners based their claim, were never presented. Considering
that they were the ones who had been asserting the existence of
these documents, it was incumbent upon them to present said
documents to prove that the properties had indeed been sold to
them by Maura Caputol. The fundamental rule is that he who
alleges must prove.18 Petitioners failure to do so was therefore
fatal to their cause.
More telling is the fact that OCT No. 26947 was issued in the
name of petitioner Jose Bejoc on October 17, 1984 by virtue of
Free Patent No. (VII-5) 17844. Undoubtedly, the patent and title
were obtained by the petitioner spouses in flagrant breach of the
confidence reposed in them by Maura Caputol, and Domingo
Cabreros and his wife, respondent Prima. The evidence was that
petitioners knew all along that the properties were not theirs. They,
in fact, admitted that they were mere overseers thereof.
We have already held that simple possession of a certificate of title
is not necessarily conclusive of a holders true ownership of
property. If a person obtains title that includes land to which he has
no legal right, that person does not, by virtue of said certificate
alone, become the owner of the land illegally or erroneously
included.19 It has been held time and again that the rule on
indefeasibility of title cannot be used for the perpetration of fraud
against the real owner.20
In Viral v. Anore, et al. 21 we ruled that:
While under ordinary circumstances the statute of limitations may
bar an action to cancel a Torrens title issued upon a free patent,
yet where the registered owner x x x knew that the parcel of land
described in the patent and in the Torrens title actually belonged to
another person, such statute barring action will not apply. It may be
the better procedure, however, that the true owner bring an action
to have the ownership or title to the land judicially settled, and the
court in the exercise of its equity jurisdiction, without ordering the
cancellation of the Torrens title issued upon the patent, may direct
the registered owner to reconvey the land to the rightful owner.
(emphasis ours)
The right to seek reconveyance based on an implied or
constructive trust is not absolute. It is subject to extinctive
prescription.22 On this point, petitioners insist that the action
prescribed in 4 years as held in the case of Millena v. Court of
Appeals.23 Petitioners insistence is, however, misplaced. The 4-
year prescriptive period is not applicable in the present case
because the action was not based exclusively on fraud but on
implied trust. Significantly, petitioners overlooked the well-settled
rule, reiterated in the same case, that an action for reconveyance
based on implied or constructive trust prescribes in 10 years.
This period is reckoned from the date of the issuance of the
original certificate of title or transfer certificate of title. Since such
issuance operates as a constructive notice to the whole
world,24 the discovery of the fraud is deemed to have taken place
at that time. Here, the title was issued on October 17, 1984. The
action for reconveyance was, on the other hand, filed 6 years later,
on February 1, 1990. Clearly, prescription had not yet attached.
The suit was brought well within the 10-year prescriptive period for
implied trusts.
WHEREFORE, the petition is hereby DENIED. The assailed
decision and resolution of the Court of Appeals are hereby
AFFIRMED in toto.
Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162033 May 8, 2009
HEIRS OF TRANQUILINO LABISTE (also known as Tranquilino
Laviste) represented by:
(1) GERARDO LABISTE, representing the Heirs of Gregorio
Labiste;
(2) OBDULLIA LABISTE GABUAN, representing the heirs of
Juan Labiste;
(3) VICTORIA G. CHIONG, representing the Heirs of Eulalia
Labiste;
(4) APOLINARIA LABISTE YLAYA, representing the Heirs of
Nicolasa Labiste;
(5) DEMOSTHENES LABISTE, representing the Heirs of
Gervacio Labiste;
(6) ALEJANDRA LABISTE; representing the Heirs of
SINFROCIO LABISTE, and
(7) CLOTILDE LABISTE CARTA, representing the Heirs of
Andres Labiste, Petitioners,
vs.
HEIRS OF JOSE LABISTE, survived by his children,
(1) ZACARIAS LABISTE, deceased and survived by his
children, namely: CRESENCIA LABISTE and EUFRONIO
LABISTE;
(2) BERNARDINO LABISTE, deceased and survived by his
children, namely: POLICARPIO LABISTE, BONIFACIO
LABISTE, FELIX LABISTE, GABINA LABISTE, CAYETANA
LABISTE and ISABEL LABISTE;
(3) LUCIA LABISTE, deceased and survived by her children,
namely: ISAAC LABISTE, GENARO LABISTE, BRAULIA
LABISTE, BRAULIO LABISTE, ASUNCION LABISTE,
ALFONSO LABISTE and CLAUDIA LABISTE;
(4) EPIFANIO LABISTE and CLAUDIA LABISTE; deceased and
survived by his children, namely SILVESTRE LABISTE,
PAULA LABISTE and GERARDA LABISTE;
(5) ANA LABISTE, deceased and survived by her children,
namely: MAXIMO LABISTE, MOISES LABISTE, GERVACIO
LABISTE, SATURNINA LABISTE and QUIRINO LABISTE;
(6) SEVERO LABISTE, deceased and survived by his children,
Namely: FELIX LABISTE, RUFINA LABISTE, SIMPLICIO
LABISTE, VICENTE LABISTE and PATRICIO
LABISTE, Respondents.
DECISION
TINGA, J.:
This is a petition for review1 under Rule 45 of the Rules of Court of
the Court of Appeals Decision dated 30 June 20032 in CA-G.R. CV
No. 65829. reversing the decision of the Regional Trial Court
(RTC) of Cebu City, Branch 9. The appellate court denied
petitioners3 motion for reconsideration in a Resolution dated 15
January 2004.
The factual antecedents are as follows:
On 29 September 1919, the late Epifanio Labiste (Epifanio), on his
own and on behalf of his brothers and sisters who were the heirs
of Jose Labiste (Jose), purchased from the Bureau of Lands Lot
No. 1054 of the Banilad Friar Lands Estate, with an area of 13,308
square meters, located at Guadalupe, Cebu City
for P36.00.4 Subsequently, on 9 June 1924, then Bureau of Lands
Director Jorge B. Vargas executed Deed of Conveyance No.
12536 selling and ceding Lot No. 1054 to Epifanio and his brothers
and sisters who were the heirs of Jose.5
After full payment of the purchase price but prior to the issuance of
the deed of conveyance, Epifanio executed an Affidavit6 (Affidavit
of Epifanio) in Spanish on 10 July 1923 affirming that he, as one of
the heirs of Jose, and his uncle and petitioners predecessor-in-
interest, Tranquilino Labiste (Tranquilino), then co-owned Lot No.
1054 because the money that was paid to the government came
from the two of them. Tranquilino and the heirs of Jose continued
to hold the property jointly.
Sometime in 1928, the Register of Deeds of Cebu City issued
Original Certificate of Title No. 3878 for Lot No. 1054. On 2 May
1928, Engineer Espiritu Bunagan (Engr. Bunagan), Deputy Public
Land Surveyor, subdivided Lot No. 1054 into two lots: Lot No.
1054-A with an area of 6,664 square meters for Tranquilino and
Lot No. 1054-B with an area of 6,664 square meters for Epifanio.
The subdivision plan prepared by Engr. Bunagan was approved by
Jose P. Dans, Acting Director of Lands on 28 October 1928.7
Subsequently, on 18 October 1939, the heirs of
Tranquilino8 purchased the one-half (1/2) interest of the heirs of
Jose9 over Lot No. 1054 for P300.00, as evidenced by the Calig-
onan sa Panagpalit10 executed by the parties in the Visayan
dialect. The heirs of Tranquilino immediately took possession of
the entire lot.
When World War II broke out, the heirs of Tranquilino fled Cebu
City and when they came back they found their homes and
possessions destroyed. The records in the Office of the Register of
Deeds, Office of the City Assessor and other government offices
were also destroyed during the war. Squatters have practically
overrun the entire property, such that neither petitioners nor
respondents possess it.
In October 1993, petitioners learned that one of the
respondents,11 Asuncion Labiste, had filed on 17 September 1993
a petition for reconstitution of title over Lot No. 1054. Petitioners
opposed the petition at first but by a compromise agreement
between the parties dated 25 March 1994, petitioners withdrew
their opposition to expedite the reconstitution process. Under the
compromise agreement, petitioners were to be given time to file a
complaint so that the issues could be litigated in an ordinary action
and the reconstituted title was to be deposited with the Clerk of
Court for a period of sixty (60) days to allow petitioners to file an
action for reconveyance and to annotate a notice of lis pendens.
The Register of Deeds of Cebu City issued the reconstituted title,
TCT No. RT-7853,12 in the name of "Epifanio Labiste, married to
Tomasa Mabitad, his brothers and sisters, heirs of Jose Labiste"
on 14 December 1994. However, respondents did not honor the
compromise agreement.
Petitioners filed a complaint13 for annulment of title seeking the
reconveyance of property and damages on 13 January 1995,
docketed as Civil Case No. CEB-16943, with the RTC of Cebu
City. Respondents claimed that the Affidavit of Epifanio and the
Calig-onan sa Panagpalit were forgeries and that petitioners
action had long prescribed or barred by laches.14
The RTC in a Decision dated 23 August 199915 ruled in favor of
petitioners. After evaluating the documents presented by
petitioners, the RTC found that they are genuine and authentic as
ancient documents and that they are valid and
enforceable.16 Moreover, it held that the action had not prescribed
as the complaint was filed about a year after the reconstitution of
the title by respondents. The judicial reconstitution was even
opposed by petitioners until a compromise agreement was
reached by the parties and approved by the RTC which ordered
the reconstitution. The RTC further held that the reconstituted title
did not give any more right to respondents than what their
predecessors-in-interest actually had as it is limited to the
reconstitution of the certificate as it stood at the time of its loss or
destruction.17
On appeal, the Court of Appeals, while affirming petitioners right to
the property, nevertheless reversed the RTCs decision on the
ground of prescription and laches. It affirmed the RTCs findings
that the Affidavit and the Calig-onan sa Panagpalit are genuine
and authentic, and that the same are valid and enforceable
documents.18Citing Article 1144 of the Civil Code, it held that
petitioners cause of action had prescribed for the action must be
brought within ten (10) years from the time the right of action
accrues upon the written contract which in this case was when
petitioners predecessors-in-interest lost possession over the
property after World War II. Also, the lapse of time to file the action
constitutes neglect on petitioners part so the principle of laches is
applicable.19
Hence, the present petition.
The genuineness and authenticity of the Affidavit of Epifanio and
the Calig-onan sa Panagpalit are beyond cavil. As we have ruled in
a litany of cases, resort to judicial review of the decisions of the
Court of Appeals under Rule 45 is confined only to errors of
law.20 The findings of fact by the lower court are conclusive absent
any palpable error or arbitrariness.21 The Court finds no reason to
depart from this principle. Moreover, it is a long settled doctrine
that findings of fact of the trial court, when affirmed by the Court of
Appeals, are binding upon the Court. It is not the function of the
Supreme Court to weigh anew the evidence already passed upon
by the Court of Appeals for these are deemed final and conclusive
and may not be reviewed on appeal.22
The sole issue that the Court has to resolve is whether or not
petitioners cause of action has prescribed.
The Court of Appeals erred in applying the rules on prescription
and the principle of laches because what is involved in the present
case is an express trust.
Trust is the right to the beneficial enjoyment of property, the legal
title to which is vested in another. It is a fiduciary relationship that
obliges the trustee to deal with the property for the benefit of the
beneficiary.23 Trust relations between parties may either be
express or implied. An express trust is created by the intention of
the trustor or of the parties. An implied trust comes into being by
operation of law.24
Express trusts are created by direct and positive acts of the
parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a
trust.25 Under Article 1444 of the Civil Code, "[n]o particular words
are required for the creation of an express trust, it being sufficient
that a trust is clearly intended." The Affidavit of Epifanio is in the
nature of a trust agreement. Epifanio affirmed that the lot brought
in his name was co-owned by him, as one of the heirs of Jose, and
his uncle Tranquilino. And by agreement, each of them has been in
possession of half of the property. Their arrangement was
corroborated by the subdivision plan prepared by Engr. Bunagan
and approved by Jose P. Dans, Acting Director of Lands.
As such, prescription and laches will run only from the time the
express trust is repudiated. The Court has held that for acquisitive
prescription to bar the action of the beneficiary against the trustee
in an express trust for the recovery of the property held in trust it
must be shown that: (a) the trustee has performed unequivocal
acts of repudiation amounting to an ouster of the cestui que trust;
(b) such positive acts of repudiation have been made known to
the cestui que trust, and (c) the evidence thereon is clear and
conclusive.26http://sc.judiciary.gov.ph/jurisprudence/2007/novembe
r2007/148788.htm - _ftn Respondents cannot rely on the fact that
the Torrens title was issued in the name of Epifanio and the other
heirs of Jose. It has been held that a trustee who obtains a Torrens
title over property held in trust by him for another cannot repudiate
the trust by relying on the registration.27 The rule requires a clear
repudiation of the trust duly communicated to the beneficiary. The
only act that can be construed as repudiation was when
respondents filed the petition for reconstitution in October 1993.
And since petitioners filed their complaint in January 1995, their
cause of action has not yet prescribed, laches cannot be attributed
to them.
It is hornbook doctrine that laches is a creation of equity and its
application is controlled by equitable considerations. Laches
cannot be used to defeat justice or perpetrate fraud and
injustice.28 Neither should its application be used to prevent the
rightful owners of a property from
recovering what has been fraudulently registered in the name of
another.http://sc.judiciary.gov.ph/jurisprudence/2006/mar2006/G.R.
No. 157954.htm - _ftn29 The equitable remedy of laches is,
therefore, unavailing in this case.
However, to recover the other half of the property covered by the
private Calig-onan sa Panagpalit and to have it registered on the
title of the property, petitioners should have filed an action to
compel30 respondents, as heirs of the sellers in the contract,31 to
execute a public deed of sale. A conveyance of land made in a
private document does not affect its validity. Article 1358,like its
forerunner Article 1280 of the Civil Code of Spain, does not require
the accomplishment of the acts or
contracts in a public instrument in order to validate the act or
contract but only to insure its efficacy,32 so that after the existence
of said contract has been admitted, the party bound may be
compelled to execute the proper document.33 But even assuming
that such action was filed by petitioners, the same had already
prescribed.1avvphi1
It is settled that only laws existing at the time of the execution of a
contract are applicable thereto and not later statutes, unless the
latter are specifically intended to have retroactive
effect.34 Consequently, it is the Old Code of Civil Procedure (Act
No. 190) which applies in this case since the Calig-onan sa
Panagpalit was executed on 18 October 1939 while the New Civil
Code took effect only on 30 August 1950. And section 43 of Act
No. 190, like its counterpart Article 1144 of the New Civil Code,
provides that action upon a written contract must be filed within ten
years.35
WHEREFORE, the petition is PARTIALLY GRANTED. The
Decision of the Court of Appeals dated 30 June 2003 in CA-G.R.
CV No. 65829 is REVERSED and SET ASIDE and the Decision of
the Regional Trial Court of Cebu City, Branch 9 dated 23 August
1999 is
REINSTATED with MODIFICATION in petitioners are
hereby DECLARED the absolute owners of one-half of Lot No.
1054 or Lot No. 1054-A under TCT No. RT-7853. The Register of
Deeds of Cebu City is hereby ORDERED to CANCEL TCT No. RT-
7853 in part and issue a new Transfer Certificate of Title to
petitioners, heirs of Tranquilino Labiste, covering Lot No. 1054-A.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 191696 April 10, 2013
ROGELIO DANTIS, Petitioner,
vs.
JULIO MAGHINANG, JR., Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set
aside the January 25, 2010 Decision1 and the March 23, 2010
Resolution2 of the Court of Appeals (CA). in CA-G.R. CV No.
85258, reversing the March 2, 2005 Decision3 of the Regional Trial
Court, Branch 18, Malolos, Bulacan (RTC), in an action for quieting
of title and recovery of possession with damages.
The Facts
The case draws its origin from a complaint4 for quieting of title and
recovery of possession with damages filed by petitioner Rogelio
Dantis (Rogelio) against respondent Julio Maghinang, Jr. (Julio,
Jr.) before the RTC, docketed as Civil Case No. 280-M-2002.
Rogelio alleged that he was the registered owner of a parcel of
land covered by Transfer Certificate of Title (TCT) No. T-125918,
with an area of 5,657 square meters, located in Sta. Rita, San
Miguel, Bulacan; that he acquired ownership of the property
through a deed of extrajudicial partition of the estate of his
deceased father, Emilio Dantis (Emilio), dated December 22, 1993;
that he had been paying the realty taxes on the said property; that
Julio, Jr. occupied and built a house on a portion of his property
without any right at all; that demands were made upon Julio, Jr.
that he vacate the premises but the same fell on deaf ears; and
that the acts of Julio, Jr. had created a cloud of doubt over his title
and right of possession of his property. He, thus, prayed that
judgment be rendered declaring him to be the true and real owner
of the parcel of land covered by TCT No. T-125918; ordering Julio,
Jr. to deliver the possession of that portion of the land he was
occupying; and directing Julio, Jr. to pay rentals from October 2000
and attorneys fees of P100,000.00.
He added that he was constrained to institute an ejectment suit
against Julio, Jr. before the Municipal Trial Court of San Miguel,
Bulacan (MTC), but the complaint was dismissed for lack of
jurisdiction and lack of cause of action.
In his Answer,5 Julio, Jr. denied the material allegations of the
complaint. By way of an affirmative defense, he claimed that he
was the actual owner of the 352 square meters (subject lot) of the
land covered by TCT No. T-125918 where he was living; that he
had been in open and continuous possession of the property for
almost thirty (30) years; the subject lot was once tenanted by his
ancestral relatives until it was sold by Rogelios father, Emilio, to
his father, Julio Maghinang, Sr. (Julio, Sr.); that later, he succeeded
to the ownership of the subject lot after his father died on March
10, 1968; and that he was entitled to a separate registration of the
subject lot on the basis of the documentary evidence of sale and
his open and uninterrupted possession of the property.
As synthesized by the RTC from the respective testimonies of the
principal witnesses, their diametrically opposed positions are as
follows:
Plaintiff Rogelio Dantis testified that he inherited 5,657 square
meters of land, identified as Lot 6-D-1 of subdivision plan Psd-
031421-054315, located at Sta. Rita, San Miguel, Bulacan,
through an Extrajudicial Partition of Estate of Emilio Dantis,
executed in December 1993 which land was titled later on under
his name, Rogelio Dantis, married to Victoria Payawal, as shown
by copy of Transfer Certificate of Title No. T-125918, issued by the
Register of Deeds of Bulacan on September 29, 1998, declared for
taxation purposes as Tax Declaration with ARP No. C20-22-043-
07-046. According to him, defendant and his predecessor-in-
interest built the house located on said lot. When he first saw it, it
was only a small hut but when he was about 60 years old, he told
defendant not to build a bigger house thereon because he would
need the land and defendant would have to vacate the land.
Plaintiff, however, has not been in physical possession of the
premises.
Defendant Julio Maghinang, Jr., presented by plaintiff as adverse
witness, testified that he has no title over the property he is
occupying. He has not paid realty taxes thereon. He has not paid
any rental to anybody. He is occupying about 352 square meters of
the lot. He presented an affidavit executed on September 3, 1953
by Ignacio Dantis, grandfather of Rogelio Dantis and the father of
Emilio Dantis. The latter was, in turn, the father of Rogelio Dantis.
The affidavit, according to affiant Ignacio Dantis, alleged that
Emilio Dantis agreed to sell 352 square meters of the lot to Julio
Maghinang on installment. Defendant was then 11 years old in
1952.
Defendant Julio Maghinang, Jr. likewise testified for the
defendants case as follows: He owns that house located at Sta.
Rita, San Miguel, Bulacan, on a 352 square meter lot. He could not
say that he is the owner because there is still question about the
lot. He claimed that his father, Julio Maghinang (Sr.), bought the
said lot from the parents of Rogelio Dantis. He admitted that the
affidavit was not signed by the alleged vendor, Emilio Dantis, the
father of Rogelio Dantis. The receipt he presented was admittedly
a mere photocopy. He spent P50,000.00 as attorneys fees. Since
1953, he has not declared the property as his nor paid the taxes
thereon because there is a problem.6
On March 2, 2005, the RTC rendered its decision declaring
Rogelio as the true owner of the entire 5,657-square meter lot
located in Sta. Rita, San Miguel, Bulacan, as evidenced by his TCT
over the same. The RTC did not lend any probative value on the
documentary evidence of sale adduced by Julio, Jr. consisting of:
1) an affidavit allegedly executed by Ignacio Dantis (Ignacio),
Rogelios grandfather, whereby said affiant attested, among others,
to the sale of the subject lot made by his son, Emilio, to Julio, Sr.
(Exhibit "3")7; and 2) an undated handwritten receipt of initial
downpayment in the amount of 100.00 supposedly issued by
Emilio to Julio, Sr. in connection with the sale of the subject lot
(Exhibit "4").8 The RTC ruled that even if these documents were
adjudged as competent evidence, still, they would only serve as
proofs that the purchase price for the subject lot had not yet been
completely paid and, hence, Rogelio was not duty-bound to deliver
the property to Julio, Jr. The RTC found Julio, Jr. to be a mere
possessor by tolerance. The dispositive portion of the RTC
decision reads:
WHEREFORE, Judgment is hereby rendered as follows:
1. quieting the title and removing whatever cloud over the title on
the parcel of land, with area of 5,647 sq. meters, more or less,
located at Sta. Rita, San Miguel, Bulacan, covered by Transfer
Certificate of Title No. T-125918 issued by the Register of Deeds of
Bulacan in the name of "Rogelio Dantis, married to Victoria
Payawal";
2. declaring that Rogelio Dantis, married to Victoria Payawal, is the
true and lawful owner of the aforementioned real property; and
3. ordering defendant Julio Maghinang, Jr. and all persons
claiming under him to peacefully vacate the said real property and
surrender the possession thereof to plaintiff or latters successors-
in-interest.
No pronouncement as to costs in this instance.
SO ORDERED.9
Julio, Jr. moved for a reconsideration of the March 2, 2005
Decision, but the motion was denied by the RTC in its May 3, 2005
Order.10 Feeling aggrieved, Julio, Jr. appealed the decision to the
CA.
On January 25, 2010, the CA rendered the assailed decision in
CA-G.R. CV NO. 85258, finding the appeal to be impressed with
merit. It held that Exhibit "4" was an indubitable proof of the sale of
the 352-square meter lot between Emilio and Julio, Sr. It also ruled
that the partial payment of the purchase price, coupled with the
delivery of the res, gave efficacy to the oral sale and brought it
outside the operation of the statute of frauds. Finally, the court a
quo declared that Julio, Jr. and his predecessors-in-interest had an
equitable claim over the subject lot which imposed on Rogelio and
his predecessors-in-interest a personal duty to convey what had
been sold after full payment of the selling price. The decretal
portion of the CA decision reads:
IN VIEW OF THE FOREGOING, the decision appealed from is
reversed. The heirs of Julio Maghinang Jr. are declared the owners
of the 352-square meter portion of the lot covered by TCT No. T-
125968 where the residence of defendant Julio Maghinang is
located, and the plaintiff is ordered to reconvey the aforesaid
portion to the aforesaid heirs, subject to partition by agreement or
action to determine the exact metes and bounds and without
prejudice to any legal remedy that the plaintiff may take with
respect to the unpaid balance of the price.
SO ORDERED.11
The motion for reconsideration12 filed by Rogelio was denied by the
CA in its March 23, 2010 Resolution. Unfazed, he filed this petition
for review on certiorari before this Court.
Issues:
The fundamental question for resolution is whether there is a
perfected contract of sale between Emilio and Julio, Sr. The
determination of this issue will settle the rightful ownership of the
subject lot.
Rogelio submits that Exhibit "3" and Exhibit "4" are devoid of
evidentiary value and, hence, deserve scant consideration. He
stresses that Exhibit "4" is inadmissible in evidence being a mere
photocopy, and the existence and due execution thereof had not
been established. He argues that even if Exhibit "4" would be
considered as competent and admissible evidence, still, it would
not be an adequate proof of the existence of the alleged oral
contract of sale because it failed to provide a description of the
subject lot, including its metes and bounds, as well as its full price
or consideration.13
Rogelio argues that while reconveyance may be availed of by the
owner of a real property wrongfully included in the certificate of title
of another, the remedy is not obtainable herein since he is a
transferee in good faith, having acquired the land covered by TCT
No. T-125918, through a Deed of Extrajudicial Partition of
Estate.14 He asserts that he could not be considered a trustee as
he was not privy to Exhibit "4." In any event, he theorizes that the
action for reconveyance on the ground of implied trust had already
prescribed since more than 10 years had lapsed since the
execution of Exhibit "4" in 1953. It is the petitioners stance that
Julio, Jr. did not acquire ownership over the subject lot by
acquisitive prescription contending that prescription does not lie
against a real property covered by a Torrens title. He opines that
his certificate of title to the subject lot cannot be collaterally
attacked because a Torrens title is indefeasible and must be
respected unless challenged in a direct proceeding.15
The Courts Ruling
In the case at bench, the CA and the RTC reached different
conclusions on the question of whether or not there was an oral
contract of sale. The RTC ruled that Rogelio Dantis was the sole
and rightful owner of the parcel of land covered by TCT No. T-
125918 and that no oral contract of sale was entered into between
Emilio Dantis and Julio Maghinang, Sr. involving the 352-square
meter portion of the said property. The CA was of the opposite
view. The determination of whether there existed an oral contract
of sale is essentially a question of fact.
In petitions for review under Rule 45, the Court, as a general rule,
does not venture to re-examine the evidence presented by the
contending parties during the trial of the case considering that it is
not a trier of facts and the findings of fact of the CA are conclusive
and binding upon this Court. The rule, however, admits of several
exceptions. One of which is when the findings of the CA are
contrary to those of the trial court.16 Considering the incongruent
factual conclusions of the CA and the RTC, this Court is
constrained to reassess the factual circumstances of the case and
reevaluate them in the interest of justice.
The petition is meritorious.
It is an age-old rule in civil cases that he who alleges a fact has the
burden of proving it and a mere allegation is not evidence.17 After
carefully sifting through the evidence on record, the Court finds
that Rogelio was able to establish a prima facie case in his favor
tending to show his exclusive ownership of the parcel of land
under TCT No. T-125918 with an area of 5,657 square meters,
which included the 352-square meter subject lot. From the records,
it appears that TCT No. T-125918 is a derivative of TCT No. T-
256228, which covered a bigger area of land measuring 30,000
square meters registered in the name of Emilio Dantis; that Emilio
died intestate on November 13, 1952; that Emilios five heirs,
including Rogelio, executed an extra-judicial partition of estate on
December 22, 1993 and divided among themselves specific
portions of the property covered by TCT No. T-256228, which were
already set apart by metes and bounds; that the land known as Lot
6-D-1 of the subdivision plan Psd-031421-054315 with an area of
5,657 sq. m. went to Rogelio, the property now covered by TCT
No. T-125918; and that the property was declared for realty tax
purpose in the name of Rogelio for which a tax declaration was
issued in his name; and that the same had not been transferred to
anyone else since its issuance.
In light of Rogelios outright denial of the oral sale together with his
insistence of ownership over the subject lot, it behooved upon
Julio, Jr. to contravene the formers claim and convince the court
that he had a valid defense. The burden of evidence shifted to
Julio, Jr. to prove that his father bought the subject lot from Emilio
Dantis. In Jison v. Court of Appeals,18 the Court held:
Simply put, he who alleges the affirmative of the issue has the
burden of proof, and upon the plaintiff in a civil case, the burden of
proof never parts. However, in the course of trial in a civil case,
once plaintiff makes out a prima facie case in his favor, the duty or
the burden of evidence shifts to defendant to controvert plaintiffs
prima facie case, otherwise, a verdict must be returned in favor of
plaintiff. Moreover, in civil cases, the party having the burden of
proof must produce a preponderance of evidence thereon, with
plaintiff having to rely on the strength of his own evidence and not
upon the weakness of the defendants. The concept of
"preponderance of evidence" refers to evidence which is of greater
weight, or more convincing, that which is offered in opposition to it;
at bottom, it means probability of truth.19
Julio, Jr. failed to discharge this burden. His pieces of evidence,
Exhibit "3" and Exhibit "4," cannot prevail over the array of
documentary and testimonial evidence that were adduced by
Rogelio. The totality of Julio, Jr.s evidence leaves much to be
desired.
To begin with, Exhibit "3," the affidavit of Ignacio, is hearsay
evidence and, thus, cannot be accorded any evidentiary weight.
Evidence is hearsay when its probative force depends on the
competency and credibility of some persons other than the witness
by whom it is sought to be produced. The exclusion of hearsay
evidence is anchored on three reasons: 1) absence of cross-
examination; 2) absence of demeanor evidence; and 3) absence of
oath.20
Jurisprudence dictates that an affidavit is merely hearsay evidence
where its affiant/maker did not take the witness stand.21 The sworn
statement of Ignacio is of this kind. The affidavit was not identified
and its averments were not affirmed by affiant Ignacio. Accordingly,
Exhibit "3" must be excluded from the judicial proceedings being
an inadmissible hearsay evidence. It cannot be deemed a
declaration against interest for the matter to be considered as an
exception to the hearsay rule because the declarant was not the
seller (Emilio), but his father (Ignacio). Exhibit "4," on the other
hand, is considered secondary evidence being a mere photocopy
which, in this case, cannot be admitted to prove the contents of the
purported undated handwritten receipt. The best evidence rule
requires that the highest available degree of proof must be
produced. For documentary evidence, the contents of a document
are best proved by the production of the document itself to the
exclusion of secondary or substitutionary evidence, pursuant to
Rule 130, Section 322.
A secondary evidence is admissible only upon compliance with
Rule 130, Section 5, which states that: when the original has been
lost or destroyed, or cannot be produced in court, the offeror, upon
proof of its execution or existence and the cause of its
unavailability without bad faith on his part, may prove its contents
by a copy, or by a recital of its contents in some authentic
document, or by the testimony of witnesses in the order stated.
Accordingly, the offeror of the secondary evidence is burdened to
satisfactorily prove the predicates thereof, namely: (1) the
execution or existence of the original; (2) the loss and destruction
of the original or its non-production in court; and (3) the
unavailability of the original is not due to bad faith on the part of
the proponent/offeror. Proof of the due execution of the document
and its subsequent loss would constitute the basis for the
introduction of secondary evidence.23 In MCC Industrial Sales
Corporation v. Ssangyong Corporation,24 it was held that where the
missing document is the foundation of the action, more strictness
in proof is required than where the document is only collaterally
involved.
Guided by these norms, the Court holds that Julio, Jr. failed to (On Cross-examination)
prove the due execution of the original of Exhibit "4" as well as its
subsequent loss. A nexus of logically related circumstance Q: x x x Where did you keep that document?
rendered Julio, Jr.s evidence highly suspect. Also, his testimony
was riddled with improbabilities and contradictions which tend to
A: I was the one keeping that document because I live in different
erode his credibility and raise doubt on the veracity of his
places, [the said] it was lost or misplaced, Sir.
evidence.

Q: In other words, it was lost while the same was in your

First, the claim of Julio, Jr. that Emilio affixed his signature on the
possession??
original of Exhibit "4" in 1953 is highly improbable because record
shows that Emilio died even before that year, specifically, on
November 13, 1952. Excerpts from Julio, Jr.s testimony relative to A: Yes, Sir.27 (Emphasis supplied)
this matter are as follows:
Still, later, Julio, Jr. claimed that his sister was the one responsible
Atty. Vicente Millora for the loss of the original of Exhibit "4" after borrowing the same
from him. Atty. Vicente Millora
(On Cross-examination)
(On Cross-examination)
Q: You dont remember how old you were when this according to
you you witnessed Emilio Dantis signed this? Q: So, who is your sister to whom you gave the original?

A: Eleven years old, Sir. A: Benedicta Laya, Sir.

Q: So that was 1953? Q: In other words now, you did not lost the document or the
original of Exhibit "4" but you gave it to your sister, am I correct?
A: Yes, Sir.
A: I just lent to her the original copy, Sir.
Q: And you were then?
Q: So, you lent this original of Exhibit "4" to your sister and your
sister never returned the same to you?
A: I was born October 1942, Sir.

A: Yes, Sir, because it was lost, that was the only one left in her
Q: You were eleven (11) years old?
custody.

A: Yes, Sir.
Interpreter:

Q: And you mean to say that you witnessed the signing allegedly
Witness referring to the xerox copy.
of the original of Exhibit "4" when you were eleven (11) years old?

Atty. Vicente Millora

A: Yes, Sir.

Q: In other words, it was your sister who lost the original, is that
Q: And you remember what was signed in this receipt. From your
correct?
memory can you tell the title of this Exhibit "4"?

A: Yes, Sir, when I lent the original.28 (Emphasis supplied)

A: What I can say that it is a Sale, Sir.

The Court also notes the confused narration of Julio, Jr. regarding
Q: So, when you said that you witnessed an alleged sale you are
the last time he saw the original of Exhibit "4."
referring to Exhibit "4"?

Atty. Vicente Millora

A: Yes, Sir.25 (Emphasis supplied)

(On Cross-examination)
Second, Julio, Jr.s testimony pertinent to the alleged loss of the
original of Exhibit "4" is laden with inconsistencies that detract from
his credibility. His testimony bears the earmarks of falsehood and, Q: And when did you last see the original?
hence, not reliable. Julio, Jr. testified in this wise:
A: When my mother died in 1993 that was the last time I tried to
Atty. Roldan Villacorta see the original of the document after her interment, Sir.

(On Direct examination) Q: Where did you see this document?

Q: Mr. Witness, I noticed that this document marked as Exhibit "4" A: From the safekeeping of my mother, Sir.29
is only a photocopy, where is the original of this document?
xxxx
A: The original was with the safekeeping of my parents because of
the lapse of time the original was misplaced, Sir.26 Q: When did you get this Exhibit "4" now, the photocopy from your
sister?
The above testimony of Julio, Jr. tends to give the impression that
the original of the document was lost while it was in the possession A: When the interment of my mother in September 1993, Sir.
of his parents. During cross-examination, however, he testified that
it was lost while it was in his possession. Q: Now, let us reform. Which one did you get after the interment of
your mother, this Exhibit "4" or the original?
Atty. Vicente Millora
A: I asked that xerox copy because I have lost the original and I
could not find the same, Sir.
Q: So, from the safe of your mother after her interment, what used
you found and got this Exhibit "4"?
A: Yes, Sir, from my sister.
Q: So, not from your mother safe?
A: The original was taken from the safe of my mother, Sir.
Q: So after your mothers death you never saw the original?
A: I did not see it anymore because the original was lost before
she died, Sir.30 (Underscoring supplied)
Third, it is quite strange that two receipts were prepared for the
initial payment of 100.00 in connection with the sale of the
subject lot. The Court notes that the contents of Exhibit "4" were
similar to those of Annex "A"31 of Julio, Jr.s Answer, dated June 9,
2002. Annex "A," however, was typewritten and the name of the
recipient indicated therein was a certain Cornelio A. Dantis, whose
identity and participation in the alleged sale was never explained.
Fourth, apart from the lone testimony of Julio, Jr., no other witness
who knew or read Exhibit "4," much less saw it executed, was
presented. In the absence of any shred of corroborative evidence,
the Court cannot help but entertain doubts on the truthfulness of
Julio, Jr.s naked assertion.
Assuming, in gratia argumenti, that Exhibit "4" is admissible in
evidence, there will still be no valid and perfected oral contract for
failure of Julio, Jr. to prove the concurrence of the essential
requisites of a contract of sale by adequate and competent
evidence.
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of, and to deliver, a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.32 A contract of sale is a consensual contract and, thus,
is perfected by mere consent which is manifested by the meeting
of the offer and the acceptance upon the thing and the cause
which are to constitute the contract.33 Until the contract of sale is
perfected, it cannot, as an independent source of obligation, serve
as a binding juridical relation between the parties.34 The essential
elements of a contract of sale are: a) consent or meeting of the
minds, that is, consent to transfer ownership in exchange for the
price; b) determinate subject matter; and c) price certain in money
or its equivalent.35 The absence of any of the essential elements
shall negate the existence of a perfected contract of sale. 36
Seemingly, Julio, Jr. wanted to prove the sale by a receipt when it
should be the receipt that should further corroborate the existence
of the sale. At best, his testimony only alleges but does not prove
the existence of the verbal agreement. Julio, Jr. miserably failed to
establish by preponderance of evidence that there was a meeting
of the minds of the parties as to the subject matter and the
purchase price.
The chief evidence of Julio, Jr. to substantiate the existence of the
oral contract of sale is Exhibit "4." For a better understanding and
resolution of the issue at hand, Exhibit "4" is being reproduced
here:
Alamin ng sino mang
Makababasa
Akong si Emilio Dantis may sapat na Gulang may asawa
naninirahan sa Sta Rita San Miguel Bul. ay kusang nagsasasay ng
sumosunod.
Na ako Tumanggap Kay Julio Maghinang ng P100.00 peso
cuartang Pilipino, bilang paunang bayad sa Lupa niyang nilote sa
akin 400 apat na raan mahigit na metro cudrado.
Testigo Tumangap,
Emilio a Dantis
A perusal of the above document would readily show that it does
not specify a determinate subject matter. Nowhere does it provide
a description of the property subject of the sale, including its metes
and bounds, as well as its total area. The Court notes that while
Julio, Jr. testified that the land subject of the sale consisted of 352
square meters, Exhibit "4," however, states that its more than 400
square meters. Moreover, Exhibit "4" does not categorically
declare the price certain in money. Neither does it state the mode
of payment of the purchase price and the period for its payment.
In Swedish Match, AB v. Court of Appeals,37 the Court ruled that
the manner of payment of the purchase price was an essential
element before a valid and binding contract of sale could exist.
Albeit the Civil Code does not explicitly provide that the minds of
the contracting parties must also meet on the terms or manner of
payment of the price, the same is needed, otherwise, there is no
sale.38 An agreement anent the manner of payment goes into the
price so much so that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.39 Further, in Velasco
v. Court of Appeals,40 where the parties already agreed on the
object of sale and on the purchase price, but not on how and when
the downpayment and the installment payments were to be paid,
this Court ruled:
Such being the situation, it cannot, therefore, be said that a definite
and firm sales agreement between the parties had been perfected
over the lot in question. Indeed, this Court has already ruled before
that a definite agreement on the manner of payment of the
purchase price is an essential element in the formation of a binding
and enforceable contract of sale. The fact, therefore, that the
petitioners delivered to the respondent the sum ofP10,000.00 as
part of the down-payment that they had to pay cannot be
considered as sufficient proof of the perfection of any purchase
and sale agreement between the parties herein under Art. 1482 of
the new Civil Code, as the petitioners themselves admit that some
essential matter - the terms of payment - still had to be mutually
covenanted.41
The CA held that partial performance of the contract of sale- giving
of a downpayment coupled with the delivery of the res - took the
oral contract out of the scope of the Statute of Frauds. This
conclusion arose from its erroneous finding that there was a
perfected contract of sale. The above disquisition, however, shows
that there was none. There is, therefore, no basis for the
application of the Statute of Frauds. The application of the Statute
of Frauds presupposes the existence of a perfected contract. 42 As
to the delivery of the res, it does not appear to be a voluntary one
pursuant to the purported sale. If Julio, Jr. happened to be there, it
was because his ancestors tenanted the land. It must be noted
that when Julio, Jr. built his house, Rogelio protested.
WHEREFORE, the petition is GRANTED. The assailed January
25, 2010 Decision and the March 23, 2010 Resolution of the Court
Appeals, in CA-G.R. CV No. 85258, are REVERSED and SET
ASIDE. The March 2, 2005 Decision of the Regional Trial Court of
Malolos, Bulacan, Branch 18, in Civil Case No. 280-M-2002, is
REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio
 SECOND DIVISION
G.R. No. 163125 April 18, 2012
JOSE ABELGAS, JR. and LETECIA JUSAYAN DE
ABELGAS, Petitioners,
vs.
SERVILLANO COMIA, RURAL BANK OF SOCORRO INC. And
RURAL BANK OF PINAMALAYAN, INC.Respondents.
DECISION
SERENO, J.:
Before this Court is a Petition for Review on Certiorari under Rule
45 of the Revised Rules of Court, seeking to review the Court of
Appeals (CA) 20 March 2003 Decision and 31 March 2004
Resolution in CA-G.R. CV No. 46241. The assailed Decision
nullified the Deed of Relinquishment, Renunciation of Rights and
Quitclaim executed by respondent Servillano Comia in favor of
petitioner spouses Jose Abelgas, Jr. and Letecia Jusayan de
Abelgas, as well as the encumbrances executed by the spouses in
favor of respondent banks.
The pertinent facts are as follows:
On 4 April 1971, Comia obtained a free patent over Lot No. 919-B
situated in Pinamalayan, Oriental Mindoro with an area of 6,790
square meters.1 Pursuant to this free patent, Lot No. 919-B was
originally registered on 26 April 1976 as Original Certificate of Title
(OCT) No. P-8553.
Subsequently, on 1 May 1971, by virtue of a notarized Deed of
Relinquishment, Renunciation of Rights and Quitclaim, Comia
voluntarily conveyed a 3,000-square-meter (3,000-sqm) portion of
Lot No. 919-B to the spouses Abelgas. It was stated in the said
Deed that the subject portion was the sole property of the spouses;
and that it had only been included in the title of Comia for it
adjoined his land. Indeed, based on the Subdivision Survey, the
3,000-sqm portion of Lot No. 919-B bordered Lot No. 919-E owned
by Jose Abelgas, Jr.2
By virtue of this subsequent voluntary dealing over the property,
the Register of Deeds cancelled OCT No. P-8553 in the name of
Comia and Transfer Certificate of Title (TCT) No. T-460303 was
issued on 3 May 1971 in the names of "CO-OWNERS, (1)
SERVILLANO COMIA, married to Estelita Amaria, and (2) SPS.
JOSE ABELGAS, JR. AND LETECIA JUSAYAN DE ABELGAS"4 as
co-owners of Lot No. 919-B. There is no explanation in the records
on how TCT No. T-46030 came about to be recorded in the names
of these people when the subject portion should have been, as a
consequence of the 1971 Deed of Relinquishment, Renunciation
of Rights and Quitclaim, in the name of the spouses Abelgas only.
Thereafter, the spouses subdivided their 3,000-sqm portion into
twelve (12) lots as evidenced by TCT Nos. T-46374 to
46375.5 Using their TCTs, they used the lots to secure their loan
obligations with Rural Bank of Pinamalayan, Inc. (RBPI), Rural
Bank of Socorro, Inc. (RBSI), and the Philippine National Bank
(PNB).
Specifically, on 6 July 1971, the spouses Abelgas constituted a
mortgage on TCT No. 46366 to secure a loan forP 1,000. Then, to
secure another loan for P 600, the spouses mortgaged on 23
August 1971 the lot covered by TCT No. T-46367. Petitioners
defaulted on their obligations and hence, the lots were sold at a
public auction, wherein RBPI prevailed as the winning
bidder.6 After the lapse of the redemption period, TCT Nos. T-
17448 and T-17445 were issued in the name of RBPI.7
As for the remaining lots, the spouses mortgaged most8 of these to
RBSI in 1971 to 1972 as security for the spouses various loans.
Petitioners defaulted on their obligations, and, thus, the mortgagee
bank foreclosed the securities wherein it emerged as the winning
bidder. Thus:9
Loan
TCT Nos. Security Date Auction Date
(P )
04 September 19 December
46364
1971 1974
46365 15 June 1971 26 January 1976 1,000
46369 & 13 November 21 December
1,000
46370 1971 1973
46372 & 21 December
19 April 1972 2,000
46373 1973
Of these properties, lots covered by TCT Nos. 46369 and 46370
had certificates that were cancelled and a new one, TCT No.
71198,10 was issued in RBSIs name.
Comia contested the issuance of these titles. He claimed that he
was the sole owner of Lot No. 919-B; and that the Deed of
Relinquishment, Renunciation of Rights and Quitclaim, which
resulted in the issuance of TCT Nos. T-46030, and T-4634 to
46375, is fictitious and nonexisting.11 Thus, Comia demanded the
recovery of Lot No. 919-B under OCT No. P-8553 and the
cancellation of the subsequent titles.12
He pursued his action before the Regional Trial Court (RTC) by
filing a Complaint for cancellation and recovery of, and/or quieting
of title to real property and damages against the Abelgas spouses,
RBPI, RBSI, and PNB.13 For their answer, the spouses asserted
that they had been in possession of the 3,000-sqm portion of Lot
No. 919-B.14 During trial, Jose Abelgas Jr. testified that before
1971, he had already purchased the said portion from
respondent.15
In turn, the mortgagee banks, RBPI and RBSI, filed cross-claims
against the spouses for them to pay their obligations in the event
that the TCTs offered as security for their loans would be declared
as null and void. Respondent assailed the encumbrances in favor
of the mortgagee banks as void ab initio and obtained in bad faith
as these were executed within the period of prohibition to dispose
lands subject of a free patent under Section 118 of the Public Land
Act (CA 141). Claiming lack of notice of any defect in the
certificates, both banks denied Comias allegations.
Section 118 of CA 14116 prohibits the alienation of lands subject to
a free patent within five years from the issuance of the grant.
Additionally, any disposition made after the prohibited period must
be with the consent of the Secretary of Environment and Natural
Resources. Evidently, the Deed and the mortgages were executed
within the prohibited period and without the Secretarys consent.
The RTC dismissed the Complaint of Comia.17 It found that the
Deed as signed by him voluntarily relinquished the subject parcel
of land in favor of its rightful owner and possessors the spouses
Abelgas.18 The trial court also upheld the validity of the mortgages,
since encumbrances made in favor of banks are exempted
according to the amendatory laws of the Public Land
Act.19 Moreover, based on Decolongon v. CA,20 the approval of the
Secretary of Environment and Natural Resources is only directory.
Accordingly, the dispositive portion reads:21
WHEREFORE, premises considered, judgment is hereby rendered
in favor of defendants spouses JOSE ABELGAS, Jr. and LETECIA
JUSAYAN DE ABELGAS; RURAL BANKS OF SOCORRO, INC.
and RURAL BANK OF PINAMALAYAN, INC., against plaintiff
SERVILLANO COMIA, as follows:
1. Dismissing plaintiffs Amended Complaint;
2. Declaring Transfer Certificate of Title No. T-46030, and
Transfer Certificates of Title Nos. T-46364 to T-46375
and subsequent certificates of title thereto in the name of
defendants Rural Bank of Socorro, Inc. or defendant
Rural Bank of Pinamalayan, Inc. as valid and existing;
3. Ordering the plaintiff to pay the following:
(a) Defendants spouse (sic) Jose Abelgas, Jr.
and Letecia Jusayan de Abelgas the sum
of P5,000.00 as attorneys fees;
(b) Defendant Rural Bank of Socorro, Inc., the
sum of P 50,000.00 as damages for
besmirched reputation being a bank institution
800
with good standing; P 2,000.00 as attorneys
fee, and P 1,000.00 as litigation expenses;
 (c) Defendant Rural Bank of Pinamalayan, Inc.,
the sum of P 50,000.00 as damages for
besmirched reputation being a bank institution
with good standing; P 2,000.00 as attorneys
fee, and P 1,000.00 as litigation expenses; and
4. The costs.
SO ORDERED.
Comia appealed to the CA, which modified the RTCs Decision.
While the appellate court sustained the due execution of the Deed
of Relinquishment, Renunciation of Rights and Quitclaim, it
construed the document as an alienation prohibited by CA 141.
The CA pronounced that in an attempt to circumvent the law, it was
made to appear that the 3,000 square meters adjoining the land of
Comia was owned by the spouses. However, based on testimonial
evidence, Abelgas purchased the said portion contrary to law.22
Likewise, the CA nullified the mortgages, as the exemption of the
banks had been removed by Commonwealth Act 45623 amending
Section 118 of Commonwealth Act 141, which took effect on 8
June 1939.24 Nevertheless, the banks may recover the value of the
loans with interest.25
In view of the Deeds nullity, and in the absence of escheat
proceedings, the CA restored to Comia Lot No. 919-B. The
appellate court ruled thus:26
WHEREFORE, the Decision appealed from is REVERSED and
SET ASIDE, and another one entered as follows:
1. Declaring the deed of relinquishment and renunciation
of rights and quitclaim as null and void;
2. Declaring the deeds of real estate mortgage executed
by defendants-appellees Jose Abelgas, Jr. and Letecia
Jusayan de Abelgas in favor of Rural Bank Pinamalayan,
Inc. and Rural Bank of Socorro, Inc., as well as the
foreclosure proceedings and certificates of sale, null and
void;
3. Ordering the Register of Deeds of the Province of
Oriental Mindoro to cancel TCT nos. T-46030, 465364 to
465375, 46821, 71171 and 71198 and to reinstate OCT
No. P-8553 in the name of plaintiff-appellant Servillano
Comia;
4. Ordering defendants-appellees Jose Abelgas, Jr. and
Letecia Jusayan de Abelgas to pay Rural Bank of
Pinamalayan, Inc., their indebtedness in the total amount
of P 1,600.00 plus interest thereon at the legal rate from
the date of maturity of promissory notes, attached as
Annexes "1-A", and "2-A" to its cross-claim, and the
amount of P 3,000.00 as attorneys fees.
5. Ordering defendants-appellees Jose Abelgas, Jr. and
Letecia Jusayan de Abelgas to pay Rural Bank of
Socorro, Inc. their indebtedness in the total amount
of P 5,600.00, plus interest thereon at the legal rate from
the date of maturity of the promissory notes, attached as
Annexes "1", "2," "3" and "4" to its cross-claim, and the
amount of P 3,000.00 as attorneys fees.
SO ORDERED.
Hence, the central issue in this Petition filed by the aggrieved
spouses is whether the CA gravely erred in declaring the Deed of
Relinquishment, Renunciation of Rights and Quitclaim and the
mortgages in favor of mortgagee banks, as null and void for being
contrary to the provisions of CA 141 and its amendatory laws.
Section 118 of CA 14127 requires that before the five year
prohibition applies, there should be an alienation or encumbrance
of the land acquired under free patent or homestead.
Section 118. Except in favor of the Government or any of its
branches, units, or institutions, lands acquired under free patent or
homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a
term of five years from and after the date of issuance of the patent
or grant, nor shall they become liable to the satisfaction of any
debt contracted prior to the expiration of said period, but the
improvements or crops on the land may be mortgaged or pledged
to qualified persons, associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five
years and before twenty-five years after issuance of title shall be
valid without the approval of the Secretary of Agriculture and
Commerce, which approval shall not be denied except on
constitutional and legal grounds.
Thus, to ascertain the correctness of the CAs Decision, there is a
need to verify whether in executing the Deed of Relinquishment,
Renunciation of Rights and Quitclaim, Comia alienated the 3,000-
sqm portion after the grant of the free patent. Although this is a
finding of fact generally beyond this Courts jurisdiction, 28 this Court
will consider the issue, considering the conflicting factual and legal
conclusions of the lower courts.
In real property law, alienation is defined as the transfer of the
property and possession of lands, tenements, or other things from
one person to another. It is the "act by which the title to real estate
is voluntarily resigned by one person to another and accepted by
the latter, in the forms prescribed by law."29 In this case, Comia did
not transfer, convey or cede the property; but rather, he
relinquished, renounced and "quitclaimed" the property
considering that the property already belonged to the spouses.
The voluntary renunciation by Comia of that portion was not an act
of alienation, but an act of correcting the inclusion of the property
in his free patent.
The evidence on record reveals that prior the grant of the free
patent, the spouses already owned the property. This fact can be
inferred from the following testimony of Jose Abelgas,
Jr.:301wphi1
A: It was in 1971 when he (Servillano Comia) went to our house
bringing with him an Original Certificate of Title issued to him by
the Bureau of Lands.
Q: What was his purpose of bringing to you Original Certificate of
Title (sic) issued by the Bureau of Lands?
A: He wants to segregate the 3,000 square meters out of 6,790
square meters from the Original Certificate of Title which I bought
from him, sir. (Emphasis supplied.)
This testimony was not contested or objected to by Comia. Neither
did he put in evidence that he sold the property during the period
of the prohibition as he would have been deemed to be in violation
of the law. Rather, his argument has always been the non-
existence of the said Deed which both lower courts have already
concluded otherwise.31
More important, Comia failed to dispute by clear and convincing
evidence32 the presumption that the spouses owned the property
prior to the grant of his free patent. This presumption is present in
this case since the Deed of Relinquishment and Renunciation of
Right was annotated in a public document, specifically, the original
certificate of title. Documents consisting of entries in public records
made in the performance of a duty by a public officer are prima
facie evidence of the facts therein stated. 33 Entry No. 81908
annotating OCT No. P-8553 reads as:34
MEMORANDUM OF INCUMBRANCES (sic)
Entry No. 81908; Doc. No. xxx [not legible] RENUNCIATION OF
RIGHTS AND QUITCLAIMS In favor of the espouses (sic): JOSE
ABELGAS JR. AND LETECIA JUSAYAN DE ABELGAS, of legal
age, filipinos, (sic) and residing at Poblacion, Gloria, Oriental
Mindoro, Philippines, - covering this Original Certificate of Title No.
P-8553, in conformity with the conditions stipulated in the Deed of
Renunciation of Rights and Quitclaim executed by SERVILLANO
COMIA married to ESTELITA AIMARIA, of legal age, filipino, (sic)
and residing at Socorro, Oriental Mindoro, Philippines, on file in
this registry.
Date of Instrument ------------------------- May 1, 1971
Date of Inscription ------------------------- May 3, 1971 at 8:10 a.m.
 (Sgd.)
REYNALDO M. MAMBIL
REGISTER OF DEEDS
The Deed of Relinquishment, Renunciation of Rights and
Quitclaim, as referred in the title, recognizes the ownership of the
spouses. Comia explicitly declared in the said Deed that the
subject portion belonging to the spouses Abelgas had been
included in his title for it adjoins his land. The Deed reads thus: 35
That I hereby relinquish, renounce, and quitclaim, and by these
presents have RELINQUISHED, RENOUNCED, and
QUITCLAIMED, all my rights, interests, possession, occupation,
and participation of a portion of THREE THOUSAND (3,000)
SQUARE METERS, of the parcel of land described above, free
from all liens and encumbrances, together with all its existing
improvements that may be found there unto the ESPOUSES (sic)
JOSE A. ABELGAS Jr. and LETECIA JUSAYAN DE
ABELGAS, likewise of legal ages, filipinos (sic) and a resident of
Poblacion, Gloria, Province of Oriental Mindoro, Philippines, their
heirs, executors, administrators, and assigns, and agreeing further
to warrant and forever defend the title and peaceful possession of
the herein espouses (sic): JOSE A. ABELGAS JR. and LETECIA
JUSAYAN DE ABELGAS, their heirs, executors, administrators,
and assigns against the just and lawful claims of any or all persons
whomsoever.
That the above described property, with an area of THREE
THOUSAND (3000) SQ. METERS, is the sole property of the
above described espouses (sic) and it had only been included in
my title for it adjoins my land situated in the barrio of Quinabigan,
Pinamalayan Oriental Mindoro and it was not my fault therefore so
it being not mine (sic). I have voluntarily renounced the area of
three thousand (3000) square meters, in favor of the said Jose
Abelgas Jr. and LETECIA JUSAYAN DE ABELGAS. (Emphasis
and underscoring in the original).
In support of the fact that the alienation transpired prior to the grant
of a free patent, it is remarkable that Comia never contested that
the spouses had been in actual possession of the subject portion
even before his patent application. The private ownership of land
as when there is a prima facie proof of ownership like a duly
registered possessory information or a clear showing of open,
continuous, exclusive, and notorious possession is not affected
by the issuance of a free patent over the same land.36
A prima facie proof of ownership is not necessarily defeated by a
free patent, especially if the title covers a portion not belonging to
the grantee. Where an applicant has illegally included portions of
an adjoining land that does not form part of the applicants
homestead, the title issued by virtue thereof should be
cancelled.37 In Angeles v. Samia38, this Court explained that:
The Land Registration Act as well as the Cadastral Act protects
only the holders of a title in good faith and does not permit its
provisions to be used as a shield for the commission of fraud, or
that one should enrich himself at the expense of another (Gustilo
vs. Maravilla, 48 Phil., 442; Angelo vs. Director of Lands, 49 Phil.,
838). The above-stated Acts do not give anybody, who resorts to
the provisions thereof, a better title than he really and lawfully has.
If he happened to obtain it by mistake or to secure, to the prejudice
of his neighbor, more land than he really owns, with or without bad
faith on his part, the certificate of title, which may have been
issued to him under the circumstances, may and should be
cancelled or corrected (Legarda and Prieto vs. Saleeby, 31 Phil.,
590). (Emphasis supplied.)
Seeing that there is no alienation to begin with, this Court finds that
the prohibition is not applicable. Thus, the Deed of
Relinquishment, Renunciation of Rights and Quitclaim is not null
and void for being contrary to the Public Land Act.
In a similar case, in Heirs of Manlapat v. Court of Appeals, this
Court held that where the alienation or transfer took place before
the filing of a free patent application, the prohibition should not be
applied. In that situation, "neither the prohibition nor the rationale
therefor which is to keep in the family of the patentee that portion
of the public land which the government has gratuitously given
him, by shielding him from the temptation to dispose of his
landholding, could be relevant."39
Consequently, this Court rules against the cancellation of TCT
Nos. T-46030, and T-46364 to 46375. Indeed, these subsequent
certificates were issued based on a duly executed instrument
sanctioned by law.
As for the encumbrances, Comia also unsuccessfully assailed the
mortgages by virtue of an alleged violation of the Public Land Act.
For the prohibition in Section 118 of CA 141 to apply, the subject
property must be acquired by virtue of either a free patent or a
homestead patent. In this case, the 3,000-sqm portion subdivided
into twelve (12) lots as evidenced by TCT Nos. T-4634 to 46375
has not been shown to be under a free patent. As it appears, what
was submitted to the mortgagee banks were TCTs not derived
from a free patent.
Thus, the encumbrances thereon are not null and void, as these
do not fall within the ambit of the prohibition. This being the case, it
cannot be said that the banks were in bad faith for accepting the
encumbered properties that did not originate from a free patent. In
any event, at the time of the mortgage, the Rural Banks Act
(Republic Act No. 720), as amended by Republic Act No.
5939,40 already allows banks to accept free patents as security for
loan obligations.41
Absent any finding of nullity, we sustain the RTCs ruling that the
alienation and encumbrances are valid. Consequently, there is no
cause to cancel the subsequent TCTs and the resulting mortgages
thereon.
IN VIEW THEREOF, the Petition is GRANTED and the assailed 20
March 2003 Decision and 31 March 2004 Resolution of the Court
of Appeals are REVERSED and SET ASIDE.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD Division
G.R. No. 165748 September 14, 2011
HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO B.
URETA, MACARIO B. URETA, GLORIA URETA-GONZALES,
ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-
TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and
HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T.
URETA, RAMON POLICRONIO T. URETA, EMMANUEL T.
URETA, and BERNADETTE T. URETA, Petitioners,
vs.
HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA,
AMPARO URETA-CASTILLO, IGNACIO F. URETA, SR.,
EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA,
JR., RAY F. URETA, ZALDY F. URETA, and MILA JEAN URETA
CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO,
namely: WILLIAM U. PARADERO, WARLITO U. PARADERO,
CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P.
GALLARDO, LETICIA P. REYES; NARCISO M. URETA;
VICENTE M. URETA; HEIRS OF FRANCISCO M. URETA,
namely: EDITA T. URETA-REYES and LOLLIE T. URETA-
VILLARUEL; ROQUE M. URETA; ADELA URETA-GONZALES;
HEIRS OF INOCENCIO M. URETA, namely: BENILDA V.
URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, and
ENRIQUE V. URETA; MERLINDA U. RIVERA; JORGE URETA;
ANDRES URETA, WENEFREDA U. TARAN; and BENEDICT
URETA, Respondents.
x - - - - - - - - - - - - - - - -x
G.R. No. 165930
HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA,
AMPARO URETA-CASTILLO, IGNACIO F. URETA, SR.,
EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA,
JR., RAY F. URETA, ZALDY F. URETA, and MILA JEAN URETA
CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO,
namely: WILLIAM U. PARADERO, WARLITO U. PARADERO,
CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P.
GALLARDO, LETICIA P. REYES; NARCISO M. URETA;
VICENTE M. URETA; HEIRS OF FRANCISCO M. URETA,
namely: EDITA T. URETA-REYES and LOLLIE T. URETA-
VILLARUEL; ROQUE M. URETA; ADELA URETA-GONZALES;
HEIRS OF INOCENCIO M. URETA, namely: BENILDA V.
URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, and
ENRIQUE V. URETA; MERLINDA U. RIVERA; JORGE URETA;
ANDRES URETA, WENEFREDA U. TARAN; and BENEDICT
URETA,Petitioners,
vs.
HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO B.
URETA, MACARIO B. URETA, GLORIA URETA-GONZALES,
ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-
TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and
HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T.
URETA, RAMON POLICRONIO T. URETA, EMMANUEL T.
URETA, and BERNADETTE T. URETA, Respondents.
DECISION
MENDOZA, J.:
These consolidated petitions for review on certiorari under Rule 45
of the 1997 Revised Rules of Civil Procedure assail the April 20,
2004 Decision1 of the Court of Appeals (CA), and its October 14,
2004 Resolution2 in C.A.-G.R. CV No. 71399, which affirmed with
modification the April 26, 2001 Decision3 of the Regional Trial
Court, Branch 9, Kalibo, Aklan (RTC) in Civil Case No. 5026.
The Facts
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely,
Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco,
Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge,
and Andres. The children of Policronio (Heirs of Policronio), are
opposed to the rest of Alfonsos children and their
descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned
several fishpens, a fishpond, a sari-sari store, a passenger jeep,
and was engaged in the buying and selling of copra. Policronio,
the eldest, was the only child of Alfonso who failed to finish
schooling and instead worked on his fathers lands.
Sometime in October 1969, Alfonso and four of his children,
namely, Policronio, Liberato, Prudencia, and Francisco, met at the
house of Liberato. Francisco, who was then a municipal judge,
suggested that in order to reduce the inheritance taxes, their father
should make it appear that he had sold some of his lands to his
children. Accordingly, Alfonso executed four (4) Deeds of Sale
covering several parcels of land in favor of
Policronio,4Liberato,5 Prudencia,6 and his common-law wife,
Valeriana Dela Cruz.7 The Deed of Sale executed on October 25,
1969, in favor of Policronio, covered six parcels of land, which are
the properties in dispute in this case.
Since the sales were only made for taxation purposes and no
monetary consideration was given, Alfonso continued to own,
possess and enjoy the lands and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the
administrator of his fathers estate. He was later succeeded by his
sister Prudencia, and then by her daughter, Carmencita Perlas.
Except for a portion of parcel 5, the rest of the parcels transferred
to Policronio were tenanted by the Fernandez Family. These
tenants never turned over the produce of the lands to Policronio or
any of his heirs, but to Alfonso and, later, to the administrators of
his estate.
Policronio died on November 22, 1974. Except for the said portion
of parcel 5, neither Policronio nor his heirs ever took possession of
the subject lands.
On April 19, 1989, Alfonsos heirs executed a Deed of Extra-
Judicial Partition,8 which included all the lands that were covered
by the four (4) deeds of sale that were previously executed by
Alfonso for taxation purposes. Conrado, Policronios eldest son,
representing the Heirs of Policronio, signed the Deed of Extra-
Judicial Partition in behalf of his co-heirs.
After their fathers death, the Heirs of Policronio found tax
declarations in his name covering the six parcels of land. On June
15, 1995, they obtained a copy of the Deed of Sale executed on
October 25, 1969 by Alfonso in favor of Policronio.
Not long after, on July 30, 1995, the Heirs of Policronio allegedly
learned about the Deed of Extra-Judicial Partition involving
Alfonsos estate when it was published in the July 19, 1995 issue
of the Aklan Reporter.
Believing that the six parcels of land belonged to their late father,
and as such, excluded from the Deed of Extra-Judicial Partition,
the Heirs of Policronio sought to amicably settle the matter with the
Heirs of Alfonso. Earnest efforts proving futile, the Heirs of
Policronio filed a Complaint for Declaration of Ownership,
Recovery of Possession, Annulment of Documents, Partition, and
Damages9 against the Heirs of Alfonso before the RTC on
November 17, 1995 where the following issues were submitted: (1)
whether or not the Deed of Sale was valid; (2) whether or not the
Deed of Extra-Judicial Partition was valid; and (3) who between
the parties was entitled to damages.
The Ruling of the RTC
On April 26, 2001, the RTC dismissed the Complaint of the Heirs
of Policronio and ruled in favor of the Heirs of Alfonso in a
decision, the dispositive portion of which reads:
WHEREFORE, the Court finds that the preponderance of evidence
tilts in favor of the defendants, hence the instant case is hereby
DISMISSED.
The counterclaims are likewise DISMISSED.
With costs against plaintiffs.
SO ORDERED.
The RTC found that the Heirs of Alfonso clearly established that
the Deed of Sale was null and void. It held that the Heirs of
Policronio failed to rebut the evidence of the Heirs of Alfonso,
which proved that the Deed of Sale in the possession of the former
was one of the four (4) Deeds of Sale executed by Alfonso in favor
of his 3 children and second wife for taxation purposes; that
although tax declarations were issued in the name of Policronio,
he or his heirs never took possession of the subject lands except a
portion of parcel 5; and that all the produce were turned over by
the tenants to Alfonso and the administrators of his estate and
never to Policronio or his heirs.
The RTC further found that there was no money involved in the
sale. Even granting that there was, as claimed by the Heirs of
Policronio, 2,000.00 for six parcels of land, the amount was
grossly inadequate. It was also noted that the aggregate area of
the subject lands was more than double the average share
adjudicated to each of the other children in the Deed of Extra-
Judicial Partition; that the siblings of Policronio were the ones who
shared in the produce of the land; and that the Heirs of Policronio
only paid real estate taxes in 1996 and 1997. The RTC opined that
Policronio must have been aware that the transfer was merely for
taxation purposes because he did not subsequently take
possession of the properties even after the death of his father.
The Deed of Extra-Judicial Partition, on the other hand, was
declared valid by the RTC as all the heirs of Alfonso were
represented and received equal shares and all the requirements of
a valid extra-judicial partition were met. The RTC considered
Conrados claim that he did not understand the full significance of
his signature when he signed in behalf of his co-heirs, as a
gratutitous assertion. The RTC was of the view that when he
admitted to have signed all the pages and personally appeared
before the notary public, he was presumed to have understood
their contents.
Lastly, neither party was entitled to damages. The Heirs of Alfonso
failed to present testimony to serve as factual basis for moral
damages, no document was presented to prove actual damages,
and the Heirs of Policronio were found to have filed the case in
good faith.
The Ruling of the CA
Aggrieved, the Heirs of Policronio appealed before the CA, which
rendered a decision on April 20, 2004, the dispositive portion of
which reads as follows:
WHEREFORE, the appeal is PARTIALLY GRANTED. The
appealed Decision, dated 26 April 2001, rendered by Hon. Judge
Dean R. Telan of the Regional Trial Court of Kalibo, Aklan, Branch
9, is hereby AFFIRMED with MODIFICATION:
1.) The Deed of Sale in favor of Policronio Ureta, Sr.,
dated 25 October 1969, covering six (6) parcels of land is
hereby declared VOID for being ABSOLUTELY
SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April
1989, is ANNULLED;
3.) The claim for actual and exemplary damages are
DISMISSED for lack of factual and legal basis.
The case is hereby REMANDED to the court of origin for the
proper partition of ALFONSO URETAS Estate in accordance with
Rule 69 of the 1997 Rules of Civil Procedure. No costs at this
instance.
SO ORDERED.
The CA affirmed the finding of the RTC that the Deed of Sale was
void. It found the Deed of Sale to be absolutely simulated as the
parties did not intend to be legally bound by it. As such, it produced
no legal effects and did not alter the juridical situation of the
parties. The CA also noted that Alfonso continued to exercise all
the rights of an owner even after the execution of the Deed of
Sale, as it was undisputed that he remained in possession of the
subject parcels of land and enjoyed their produce until his death.
Policronio, on the other hand, never exercised any rights
pertaining to an owner over the subject lands from the time they
were sold to him up until his death. He never took or attempted to
take possession of the land even after his fathers death, never
demanded delivery of the produce from the tenants, and never
paid realty taxes on the properties. It was also noted that
Policronio never disclosed the existence of the Deed of Sale to his
children, as they were, in fact, surprised to discover its existence.
The CA, thus, concluded that Policronio must have been aware
that the transfer was only made for taxation purposes.
The testimony of Amparo Castillo, as to the circumstances
surrounding the actual arrangement and agreement between the
parties prior to the execution of the four (4) Deeds of Sale, was
found by the CA to be unrebutted. The RTCs assessment of the
credibility of her testimony was accorded respect, and the intention
of the parties was given the primary consideration in determining
the true nature of the contract.
Contrary to the finding of the RTC though, the CA annulled the
Deed of Extra-Judicial Partition due to the incapacity of one of the
parties to give his consent to the contract. It held that before
Conrado could validly bind his co-heirs to the Deed of Extra-
Judicial Partition, it was necessary that he be clothed with the
proper authority. The CA ruled that a special power of attorney was
required under Article 1878 (5) and (15) of the Civil Code. Without
a special power of attorney, it was held that Conrado lacked the
legal capactiy to give the consent of his co-heirs, thus, rendering
the Deed of Extra-Judicial Partition voidable under Article 1390 (1)
of the Civil Code.
As a consequence, the CA ordered the remand of the case to the
RTC for the proper partition of the estate, with the option that the
parties may still voluntarily effect the partition by executing another
agreement or by adopting the assailed Deed of Partition with the
RTCs approval in either case. Otherwise, the RTC may proceed
with the compulsory partition of the estate in accordance with the
Rules.
With regard to the claim for damages, the CA agreed with the RTC
and dismissed the claim for actual and compensatory damages for
lack of factual and legal basis.
Both parties filed their respective Motions for Reconsideration,
which were denied by the CA for lack of merit in a Resolution
dated October 14, 2004.
In their Motion for Reconsideration, the Heirs of Policronio argued
that the RTC violated the best evidence rule in giving credence to
the testimony of Amparo Castillo with regard to the simulation of
the Deed of Sale, and that prescription had set in precluding any
question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule
130, Section 9 (b) and (c), which provides that
evidence aliunde may be allowed to explain the terms of the
written agreement if the same failed to express the true intent and
agreement of the parties thereto, or when the validity of the written
agreement was put in issue. Furthermore, the CA found that the
Heirs of Policronio waived their right to object to
evidence aliunde having failed to do so during trial and for raising
such only for the first time on appeal. With regard to prescription,
the CA ruled that the action or defense for the declaration of the
inexistence of a contract did not prescribe under Article 1410 of the
Civil Code.
On the other hand, the Heirs of Alfonso argued that the Deed of
Extra-Judicial Partition should not have been annulled, and instead
the preterited heirs should be given their share. The CA reiterated
that Conrados lack of capacity to give his co-heirs consent to the
extra-judicial settlement rendered the same voidable.
Hence, the present Petitions for Review on Certiorari.
The Issues
The issues presented for resolution by the Heirs of Policronio in
G.R. No. 165748 are as follows:
I.
Whether the Court of Appeals is correct in ruling that
the Deed of Absolute Sale of 25 October 1969 is void
for being absolutely fictitious and in relation
therewith, may parol evidence be entertained to
thwart its binding effect after the parties have both
died?
Assuming that indeed the said document is
simulated, whether or not the parties thereto
including their successors in interest are estopped
to question its validity, they being bound by Articles
1412 and 1421 of the Civil Code?
 II.
Whether prescription applies to bar any question
respecting the validity of the Deed of Absolute Sale
dated 25 October 1969? Whether prescription applies
to bar any collateral attack on the validity of the deed
of absolute sale executed 21 years earlier?
III.
Whether the Court of Appeals correctly ruled in
nullifying the Deed of Extrajudicial Partition because
Conrado Ureta signed the same without the written
authority from his siblings in contravention of Article
1878 in relation to Article 1390 of the Civil Code and
in relation therewith, whether the defense of
ratification and/or preterition raised for the first time
on appeal may be entertained?
The issues presented for resolution by the Heirs of
Alfonso in G.R. No. 165930 are as follows:
I.
Whether or not grave error was committed by the
Trial Court and Court of Appeals in declaring the
Deed of Sale of subject properties as absolutely
simulated and null and void thru parol evidence
based on their factual findings as to its fictitious
nature, and there being waiver of any objection
based on violation of the parol evidence rule.
II.
Whether or not the Court of Appeals was correct in
holding that Conrado Uretas lack of capacity to give
his co-heirs consent to the Extra-Judicial Partition
rendered the same voidable.
III.
Granting arguendo that Conrado Ureta was not
authorized to represent his co-heirs and there was
no ratification, whether or not the Court of Appeals
was correct in ordering the remand of the case to the
Regional Trial Court for partition of the estate of
Alfonso Ureta.
IV.
Since the sale in favor of Policronio Ureta Sr. was
null and void ab initio, the properties covered therein
formed part of the estate of the late Alfonso Ureta
and was correctly included in the Deed of
Extrajudicial Partition even if no prior action for
nullification of the sale was filed by the heirs of
Liberato Ureta.
V.
Whether or not the heirs of Policronio Ureta Sr. can
claim that estoppel based on Article 1412 of the Civil
Code as well as the issue of prescription can still be
raised on appeal.
These various contentions revolve around two major issues, to wit:
(1) whether the Deed of Sale is valid, and (2) whether the Deed of
Extra-Judicial Partition is valid. Thus, the assigned errors shall be
discussed jointly and inseriatim.
The Ruling of the Court
Validity of the Deed of Sale
Two veritable legal presumptions bear on the validity of the Deed
of Sale: (1) that there was sufficient consideration for the contract;
and (2) that it was the result of a fair and regular private
transaction. If shown to hold, these presumptions infer prima facie
the transactions validity, except that it must yield to the evidence
adduced.10
As will be discussed below, the evidence overcomes these two
presumptions.
Absolute Simulation
First, the Deed of Sale was not the result of a fair and regular
private transaction because it was absolutely simulated.
The Heirs of Policronio argued that the land had been validly sold
to Policronio as the Deed of Sale contained all the essential
elements of a valid contract of sale, by virtue of which, the subject
properties were transferred in his name as evidenced by the tax
declaration. There being no invalidation prior to the execution of
the Deed of Extra-Judicial Partition, the probity and integrity of the
Deed of Sale should remain undiminished and accorded respect
as it was a duly notarized public instrument.
The Heirs of Policronio posited that his loyal services to his father
and his being the eldest among Alfonsos children, might have
prompted the old man to sell the subject lands to him at a very low
price as an advance inheritance. They explained that Policronios
failure to take possession of the subject lands and to claim their
produce manifests a Filipino family practice wherein a child would
take possession and enjoy the fruits of the land sold by a parent
only after the latters death. Policronio simply treated the lands the
same way his father Alfonso treated them - where his children
enjoyed usufructuary rights over the properties, as opposed to
appropriating them exclusively to himself. They contended that
Policronios failure to take actual possession of the lands did not
prove that he was not the owner as he was merely exercising his
right to dispose of them. They argue that it was an error on the part
of the CA to conclude that ownership by Policronio was not
established by his failure to possess the properties sold. Instead,
emphasis should be made on the fact that the tax declarations,
being indicia of possession, were in Policronios name.
They further argued that the Heirs of Alfonso failed to appreciate
that the Deed of Sale was clear enough to convey the subject
parcels of land. Citing jurisprudence, they contend that there is a
presumption that an instrument sets out the true agreement of the
parties thereto and that it was executed for valuable
consideration,11 and where there is no doubt as to the intention of
the parties to a contract, the literal meaning of the stipulation shall
control.12 Nowhere in the Deed of Sale is it indicated that the
transfer was only for taxation purposes. On the contrary, the
document clearly indicates that the lands were sold. Therefore,
they averred that the literal meaning of the stipulation should
control.
The Court disagrees.
The Court finds no cogent reason to deviate from the finding of the
CA that the Deed of Sale is null and void for being absolutely
simulated. The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at
all; the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is
not intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their real
agreement.
Valerio v. Refresca13 is instructive on the matter of simulation of
contracts:
In absolute simulation, there is a colorable contract but it has no
substance as the parties have no intention to be bound by it. The
main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or
in any way alter the juridical situation of the parties. As a result, an
absolutely simulated or fictitious contract is void, and the parties
may recover from each other what they may have given under the
contract. However, if the parties state a false cause in the contract
to conceal their real agreement, the contract is relatively simulated
and the parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract, the
agreement is absolutely binding and enforceable between the
parties and their successors in interest.
Lacking, therefore, in an absolutely simulated contract is consent
which is essential to a valid and enforceable contract.14 Thus,
where a person, in order to place his property beyond the reach of
his creditors, simulates a transfer of it to another, he does not
really intend to divest himself of his title and control of the property;
hence, the deed of transfer is but a sham.15 Similarly, in this case,
Alfonso simulated a transfer to Policronio purely for taxation
purposes, without intending to transfer ownership over the subject
lands.
The primary consideration in determining the true nature of a
contract is the intention of the parties. If the words of a contract
appear to contravene the evident intention of the parties, the latter
shall prevail. Such intention is determined not only from the
express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.16 The true
intention of the parties in this case was sufficiently proven by the
Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of
evidence17 that the Deed of Sale was one of the four (4) absolutely
simulated Deeds of Sale which involved no actual monetary
consideration, executed by Alfonso in favor of his children,
Policronio, Liberato, and Prudencia, and his second wife,
Valeriana, for taxation purposes.
Amparo Castillo, the daughter of Liberato, testified, to wit:
Q: Now sometime in the year 1969 can you recall if your
grandfather and his children [met] in your house?
A: Yes sir, that was sometime in October 1969 when they [met] in
our house, my grandfather, my late uncle Policronio Ureta, my late
uncle Liberato Ureta, my uncle Francisco Ureta, and then my
auntie Prudencia Ureta they talk[ed] about, that idea came from
my uncle Francisco Ureta to [sell] some parcels of land to his
children to lessen the inheritance tax whatever happened to my
grandfather, actually no money involved in this sale.
Q: Now you said there was that agreement, verbal agreement.
[W]here were you when this Alfonso Ureta and his children
gather[ed] in your house?
A: I was near them in fact I heard everything they were talking
[about]
xxx
Q: Were there documents of sale executed by Alfonso Ureta in
furtherance of their verbal agreement?
A: Yes sir.
Q: To whom in particular did your grandfather Alfonso Ureta
execute this deed of sale without money consideration according
to you?
A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero.
Q: And who else?
A: To Valeriana dela Cruz.
Q: How about your father?
A: He has.18
The other Deeds of Sale executed by Alfonso in favor of his
children Prudencia and Liberato, and second wife Valeriana, all
bearing the same date of execution, were duly presented in
evidence by the Heirs of Alfonso, and were uncontested by the
Heirs of Policronio. The lands which were the subject of these
Deeds of Sale were in fact included in the Deed of Extra-Judicial
Partition executed by all the heirs of Alfonso, where it was
expressly stipulated:
That the above-named Amparo U. Castillo, Prudencia U. Paradero,
Conrado B. Ureta and Merlinda U. Rivera do hereby recognize and
acknowledge as a fact that the properties presently declared in
their respective names or in the names of their respective parents
and are included in the foregoing instrument are actually the
properties of the deceased Alfonso Ureta and were transferred
only for the purpose of effective administration and development
and convenience in the payment of taxes and, therefore, all
instruments conveying or affecting the transfer of said properties
are null and void from the beginning.19
As found by the CA, Alfonso continued to exercise all the rights of
an owner even after the execution of the Deeds of Sale. It was
undisputed that Alfonso remained in possession of the subject
lands and enjoyed their produce until his death. No credence can
be given to the contention of the Heirs of Policrionio that their
father did not take possession of the subject lands or enjoyed the
fruits thereof in deference to a Filipino family practice. Had this
been true, Policronio should have taken possession of the subject
lands after his father died. On the contrary, it was admitted that
neither Policronio nor his heirs ever took possession of the subject
lands from the time they were sold to him, and even after the death
of both Alfonso and Policronio.
It was also admitted by the Heirs of Policronio that the tenants of
the subject lands never turned over the produce of the properties
to Policronio or his heirs but only to Alfonso and the administrators
of his estate. Neither was there a demand for their delivery to
Policronio or his heirs. Neither did Policronio ever pay real estate
taxes on the properties, the only payment on record being those
made by his heirs in 1996 and 1997 ten years after his death. In
sum, Policronio never exercised any rights pertaining to an owner
over the subject lands.
The most protuberant index of simulation of contract is the
complete absence of an attempt in any manner on the part of the
ostensible buyer to assert rights of ownership over the subject
properties. Policronios failure to take exclusive possession of the
subject properties or, in the alternative, to collect rentals, is
contrary to the principle of ownership. Such failure is a clear badge
of simulation that renders the whole transaction void. 20
It is further telling that Policronio never disclosed the existence of
the Deed of Sale to his children. This, coupled with Policronios
failure to exercise any rights pertaining to an owner of the subject
lands, leads to the conclusion that he was aware that the transfer
was only made for taxation purposes and never intended to bind
the parties thereto.
As the above factual circumstances remain unrebutted by the
Heirs of Policronio, the factual findings of the RTC, which were
affirmed by the CA, remain binding and conclusive upon this
Court.21
It is clear that the parties did not intend to be bound at all, and as
such, the Deed of Sale produced no legal effects and did not alter
the juridical situation of the parties. The Deed of Sale is, therefore,
void for being absolutely simulated pursuant to Article 1409 (2) of
the Civil Code which provides:
Art. 1409. The following contracts are inexistent and void from the
beginning:
xxx
(2) Those which are absolutely simulated or fictitious;
xxx
For guidance, the following are the most fundamental
characteristics of void or inexistent contracts:
1) As a general rule, they produce no legal effects
whatsoever in accordance with the principle "quod
nullum est nullum producit effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or
absolute nullity cannot be waived or renounced.
4) The action or defense for the declaration of their
inexistence or absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot
be invoked by a person whose interests are not directly
affected.22
Since the Deed of Sale is void, the subject properties were
properly included in the Deed of Extra-Judicial Partition of the
estate of Alfonso.
Absence and Inadequacy of Consideration
The second presumption is rebutted by the lack of consideration
for the Deed of Sale.
In their Answer,23 the Heirs of Alfonso initially argued that the Deed
of Sale was void for lack of consideration, and even granting that
there was consideration, such was inadequate. The Heirs of
Policronio counter that the defenses of absence or inadequacy of
consideration are not grounds to render a contract void.
The Heirs of Policronio contended that under Article 1470 of the
Civil Code, gross inadequacy of the price does not affect a
contract of sale, except as it may indicate a defect in the consent,
or that the parties really intended a donation or some other act or
contract. Citing jurisprudence, they argued that inadequacy of
monetary consideration does not render a conveyance inexistent
as liberality may be sufficient cause for a valid contract, whereas
fraud or bad faith may render it either rescissible or voidable,
although valid until annulled.24 Thus, they argued that if the
contract suffers from inadequate consideration, it remains valid
until annulled, and the remedy of rescission calls for judicial
intervention, which remedy the Heirs of Alfonso failed to take.
It is further argued that even granting that the sale of the subject
lands for a consideration of 2,000.00 was inadequate, absent any
evidence of the fair market value of the land at the time of its sale,
it cannot be concluded that the price at which it was sold was
inadequate.25 As there is nothing in the records to show that the
Heirs of Alfonso supplied the true value of the land in 1969, the
amount of 2,000.00 must thus stand as its saleable value.
On this issue, the Court finds for the Heirs of Alfonso.
For lack of consideration, the Deed of Sale is once again found to
be void. It states that Policronio paid, and Alfonso received, the
2,000.00 purchase price on the date of the signing of the
contract:
That I, ALFONSO F. URETA, x x x for and in consideration of the
sum of TWO THOUSAND (2,000.00) PESOS, Philippine
Currency, to me in hand paid by POLICRONIO M. URETA, x x x,
do hereby CEDE, TRANSFER, and CONVEY, by way of absolute
sale, x x x six (6) parcels of land x x x.26 [Emphasis ours]
Although, on its face, the Deed of Sale appears to be supported by
valuable consideration, the RTC found that there was no money
involved in the sale.27 This finding was affirmed by the CA in ruling
that the sale is void for being absolutely simulated. Considering
that there is no cogent reason to deviate from such factual
findings, they are binding on this Court.
It is well-settled in a long line of cases that where a deed of sale
states that the purchase price has been paid but in fact has never
been paid, the deed of sale is null and void for lack of
consideration.28 Thus, although the contract states that the
purchase price of 2,000.00 was paid by Policronio to Alfonso for
the subject properties, it has been proven that such was never in
fact paid as there was no money involved. It must, therefore, follow
that the Deed of Sale is void for lack of consideration.
Given that the Deed of Sale is void, it is unnecessary to discuss
the issue on the inadequacy of consideration.
Parol Evidence and Hearsay
The Heirs of Policronio aver that the rules on parol evidence and
hearsay were violated by the CA in ruling that the Deed of Sale
was void.
They argued that based on the parol evidence rule, the Heirs of
Alfonso and, specifically, Amparo Castillo, were not in a position to
prove the terms outside of the contract because they were not
parties nor successors-in-interest in the Deed of Sale in question.
Thus, it is argued that the testimony of Amparo Castillo violates the
parol evidence rule.
Stemming from the presumption that the Heirs of Alfonso were not
parties to the contract, it is also argued that the parol evidence rule
may not be properly invoked by either party in the litigation against
the other, where at least one of the parties to the suit is not a party
or a privy of a party to the written instrument in question and does
not base a claim on the instrument or assert a right originating in
the instrument or the relation established thereby.29
Their arguments are untenable.
The objection against the admission of any evidence must be
made at the proper time, as soon as the grounds therefor become
reasonably apparent, and if not so made, it will be understood to
have been waived. In the case of testimonial evidence, the
objection must be made when the objectionable question is asked
or after the answer is given if the objectionable features become
apparent only by reason of such answer.30 In this case, the Heirs of
Policronio failed to timely object to the testimony of Amparo
Castillo and they are, thus, deemed to have waived the benefit of
the parol evidence rule.
Granting that the Heirs of Policronio timely objected to the
testimony of Amparo Castillo, their argument would still fail.
Section 9 of Rule 130 of the Rules of Court provides:
Section 9. Evidence of written agreements. When the terms of
an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between
the parties and their successors in interest, no evidence of such
terms other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add
to the terms of written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the
written agreement;
(b) The failure of the written agreement to express the
true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties
or their successors in interest after the execution of the
written agreement.
The term "agreement" includes wills.
[Emphasis ours]
Paragraphs (b) and (c) are applicable in the case at bench.
The failure of the Deed of Sale to express the true intent and
agreement of the parties was clearly put in issue in the Answer31 of
the Heirs of Alfonso to the Complaint. It was alleged that the Deed
of Sale was only made to lessen the payment of estate and
inheritance taxes and not meant to transfer ownership. The
exception in paragraph (b) is allowed to enable the court to
ascertain the true intent of the parties, and once the intent is clear,
it shall prevail over what the document appears to be on its
face.32 As the true intent of the parties was duly proven in the
present case, it now prevails over what appears on the Deed of
Sale.
The validity of the Deed of Sale was also put in issue in the
Answer, and was precisely one of the issues submitted to the RTC
for resolution.33 The operation of the parol evidence rule requires
the existence of a valid written agreement. It is, thus, not
applicable in a proceeding where the validity of such agreement is
the fact in dispute, such as when a contract may be void for lack of
consideration.34 Considering that the Deed of Sale has been
shown to be void for being absolutely simulated and for lack of
consideration, the Heirs of Alfonso are not precluded from
presenting evidence to modify, explain or add to the terms of the
written agreement.
The Heirs of Policronio must be in a state of confusion in arguing
that the Heirs of Alfonso may not question the Deed of Sale for not
being parties or successors-in-interest therein on the basis that the
parol evidence rule may not be properly invoked in a proceeding or
litigation where at least one of the parties to the suit is not a party
or a privy of a party to the written instrument in question and does
not base a claim on the instrument or assert a right originating in
the instrument or the relation established thereby. If their argument
was to be accepted, then the Heirs of Policronio would themselves
be precluded from invoking the parol evidence rule to exclude the
evidence of the Heirs of Alfonso.
Indeed, the applicability of the parol evidence rule requires that the
case be between parties and their successors-in-interest.35 In this
case, both the Heirs of Alfonso and the Heirs of Policronio are
successors-in-interest of the parties to the Deed of Sale as they
claim rights under Alfonso and Policronio, respectively. The parol
evidence rule excluding evidence aliunde, however, still cannot
apply because the present case falls under two exceptions to the
rule, as discussed above.
With respect to hearsay, the Heirs of Policronio contended that the
rule on hearsay was violated when the testimony of Amparo
Castillo was given weight in proving that the subject lands were
only sold for taxation purposes as she was a person alien to the
contract. Even granting that they did not object to her testimony
during trial, they argued that it should not have been appreciated
by the CA because it had no probative value whatsoever.36
The Court disagrees.
It has indeed been held that hearsay evidence whether objected to
or not cannot be given credence for having no probative
value.37 This principle, however, has been relaxed in cases where,
in addition to the failure to object to the admissibility of the subject
evidence, there were other pieces of evidence presented or there
were other circumstances prevailing to support the fact in issue. In
Top-Weld Manufacturing, Inc. v. ECED S.A.,38 this Court held:
Hearsay evidence alone may be insufficient to establish a fact in
an injunction suit (Parker v. Furlong, 62 P. 490) but, when no
objection is made thereto, it is, like any other evidence, to be
considered and given the importance it deserves. (Smith v.
Delaware & Atlantic Telegraph & Telephone Co., 51 A 464).
Although we should warn of the undesirability of issuing judgments
solely on the basis of the affidavits submitted, where as here, said
affidavits are overwhelming, uncontroverted by competent
evidence and not inherently improbable, we are constrained to
uphold the allegations of the respondents regarding the
multifarious violations of the contracts made by the petitioner.
In the case at bench, there were other prevailing circumstances
which corroborate the testimony of Amparo Castillo. First, the other
Deeds of Sale which were executed in favor of Liberato,
Prudencia, and Valeriana on the same day as that of Policronios
were all presented in evidence. Second, all the properties subject
therein were included in the Deed of Extra-Judicial Partition of the
estate of Alfonso. Third, Policronio, during his lifetime, never
exercised acts of ownership over the subject properties (as he
never demanded or took possession of them, never demanded or
received the produce thereof, and never paid real estate taxes
thereon). Fourth, Policronio never informed his children of the sale.
As the Heirs of Policronio failed to controvert the evidence
presented, and to timely object to the testimony of Amparo Castillo,
both the RTC and the CA correctly accorded probative weight to
her testimony.
Prior Action Unnecessary
The Heirs of Policronio averred that the Heirs of Alfonso should
have filed an action to declare the sale void prior to executing the
Deed of Extra-Judicial Partition. They argued that the sale should
enjoy the presumption of regularity, and until overturned by a court,
the Heirs of Alfonso had no authority to include the land in the
inventory of properties of Alfonsos estate. By doing so, they
arrogated upon themselves the power of invalidating the Deed of
Sale which is exclusively vested in a court of law which, in turn,
can rule only upon the observance of due process. Thus, they
contended that prescription, laches, or estoppel have set in to
militate against assailing the validity of the sale.
The Heirs of Policronio are mistaken.
A simulated contract of sale is without any cause or consideration,
and is, therefore, null and void; in such case, no independent
action to rescind or annul the contract is necessary, and it may be
treated as non-existent for all purposes.39 A void or inexistent
contract is one which has no force and effect from the beginning,
as if it has never been entered into, and which cannot be validated
either by time or ratification. A void contract produces no effect
whatsoever either against or in favor of anyone; it does not create,
modify or extinguish the juridical relation to which it
refers.40 Therefore, it was not necessary for the Heirs of Alfonso to
first file an action to declare the nullity of the Deed of Sale prior to
executing the Deed of Extra-Judicial Partition.
Personality to Question Sale
The Heirs of Policronio contended that the Heirs of Alfonso are not
parties, heirs, or successors-in-interest under the contemplation of
law to clothe them with the personality to question the Deed of
Sale. They argued that under Article 1311 of the Civil Code,
contracts take effect only between the parties, their assigns and
heirs. Thus, the genuine character of a contract which personally
binds the parties cannot be put in issue by a person who is not a
party thereto. They posited that the Heirs of Alfonso were not
parties to the contract; neither did they appear to be beneficiaries
by way of assignment or inheritance. Unlike themselves who are
direct heirs of Policronio, the Heirs of Alfonso are not Alfonsos
direct heirs. For the Heirs of Alfonso to qualify as parties, under
Article 1311 of the Civil Code, they must first prove that they are
either heirs or assignees. Being neither, they have no legal
standing to question the Deed of Sale.
They further argued that the sale cannot be assailed for being
barred under Article 1421 of the Civil Code which provides that the
defense of illegality of a contract is not available to third persons
whose interests are not directly affected.
Again, the Court disagrees.
Article 1311 and Article 1421 of the Civil Code provide:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, x x x
Art. 1421. The defense of illegality of contracts is not available to
third persons whose interests are not directly affected.
The right to set up the nullity of a void or non-existent contract is
not limited to the parties, as in the case of annullable or voidable
contracts; it is extended to third persons who are directly affected
by the contract. Thus, where a contract is absolutely simulated,
even third persons who may be prejudiced thereby may set up its
inexistence.41 The Heirs of Alfonso are the children of Alfonso, with
his deceased children represented by their children (Alfonsos
grandchildren). The Heirs of Alfonso are clearly his heirs and
successors-in-interest and, as such, their interests are directly
affected, thereby giving them the right to question the legality of
the Deed of Sale.
Inapplicability of Article 842
The Heirs of Policronio further argued that even assuming that the
Heirs of Alfonso have an interest in the Deed of Sale, they would
still be precluded from questioning its validity. They posited that the
Heirs of Alfonso must first prove that the sale of Alfonsos
properties to Policronio substantially diminished their successional
rights or that their legitimes would be unduly prejudiced,
considering that under Article 842 of the Civil Code, one who has
compulsory heirs may dispose of his estate provided that he does
not contravene the provisions of the Civil Code with regard to the
legitime of said heirs. Having failed to do so, they argued that the
Heirs of Alfonso should be precluded from questioning the validity
of the Deed of Sale.
Still, the Court disagrees.
Article 842 of the Civil Code provides:
Art. 842. One who has no compulsory heirs may dispose by will of
all his estate or any part of it in favor of any person having capacity
to succeed.
One who has compulsory heirs may dispose of his estate provided
he does not contravene the provisions of this Code with regard to
the legitime of said heirs.
This article refers to the principle of freedom of disposition by will.
What is involved in the case at bench is not a disposition by will
but by Deed of Sale. Hence, the Heirs of Alfonso need not first
prove that the disposition substantially diminished their
successional rights or unduly prejudiced their legitimes.
Inapplicability of Article 1412
The Heirs of Policronio contended that even assuming that the
contract was simulated, the Heirs of Alfonso would still be barred
from recovering the properties by reason of Article 1412 of the Civil
Code, which provides that if the act in which the unlawful or
forbidden cause does not constitute a criminal offense, and the
fault is both on the contracting parties, neither may recover what
he has given by virtue of the contract or demand the performance
of the others undertaking. As the Heirs of Alfonso alleged that the
purpose of the sale was to avoid the payment of inheritance taxes,
they cannot take from the Heirs of Policronio what had been given
to their father.
On this point, the Court again disagrees.
Article 1412 of the Civil Code is as follows:
Art. 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed:
(1) When the fault is on the part of both contracting parties, neither
may recover what he has given by virtue of the contract, or
demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other, who is not at
fault, may demand the return of what he has given without any
obligation to comply with his promise.
Article 1412 is not applicable to fictitious or simulated contracts,
because they refer to contracts with an illegal cause or subject-
matter.42 This article presupposes the existence of a cause, it
cannot refer to fictitious or simulated contracts which are in reality
non-existent.43 As it has been determined that the Deed of Sale is
a simulated contract, the provision cannot apply to it.
Granting that the Deed of Sale was not simulated, the provision
would still not apply. Since the subject properties were included as
properties of Alfonso in the Deed of Extra-Judicial Partition, they
are covered by corresponding inheritance and estate taxes.
Therefore, tax evasion, if at all present, would not arise, and Article
1412 would again be inapplicable.
Prescription
From the position that the Deed of Sale is valid and not void, the
Heirs of Policronio argued that any question regarding its validity
should have been initiated through judicial process within 10 years
from its notarization in accordance with Article 1144 of the Civil
Code. Since 21 years had already elapsed when the Heirs of
Alfonso assailed the validity of the Deed of Sale in 1996,
prescription had set in. Furthermore, since the Heirs of Alfonso did
not seek to nullify the tax declarations of Policronio, they had
impliedly acquiesced and given due recognition to the Heirs of
Policronio as the rightful inheritors and should, thus, be barred
from laying claim on the land.
The Heirs of Policronio are mistaken.
Article 1410 of the Civil Code provides:
Art. 1410. The action for the declaration of the inexistence of a
contract does not prescribe.
This is one of the most fundamental characteristics of void or
inexistent contracts.44
As the Deed of Sale is a void contract, the action for the
declaration of its nullity, even if filed 21 years after its execution,
cannot be barred by prescription for it is imprescriptible.
Furthermore, the right to set up the defense of inexistence or
absolute nullity cannot be waived or renounced.45 Therefore, the
Heirs of Alfonso cannot be precluded from setting up the defense
of its inexistence.
Validity of the Deed of Extra-Judicial Partition
The Court now resolves the issue of the validity of the Deed of
Extra-Judicial Partition.
Unenforceability
The Heirs of Alfonso argued that the CA was mistaken in annulling
the Deed of Extra-Judicial Partition due to the incapacity of
Conrado to give the consent of his co-heirs for lack of a special
power of attorney. They contended that what was involved was not
the capacity to give consent in behalf of the co-heirs but the
authority to represent them. They argue that the Deed of Extra-
Judicial Partition is not a voidable or an annullable contract under
Article 1390 of the Civil Code, but rather, it is an unenforceable or,
more specifically, an unauthorized contract under Articles 1403 (1)
and 1317 of the Civil Code. As such, the Deed of Extra-Judicial
Partition should not be annulled but only be rendered
unenforceable against the siblings of Conrado.
They further argued that under Article 1317 of the Civil Code, when
the persons represented without authority have ratified the
unauthorized acts, the contract becomes enforceable and binding.
They contended that the Heirs of Policronio ratified the Deed of
Extra-Judicial Partition when Conrado took possession of one of
the parcels of land adjudicated to him and his siblings, and when
another parcel was used as collateral for a loan entered into by
some of the Heirs of Policronio. The Deed of Extra-Judicial
Partition having been ratified and its benefits accepted, the same
thus became enforceable and binding upon them.
The Heirs of Alfonso averred that granting arguendo that Conrado
was not authorized to represent his co-heirs and there was no
ratification, the CA should not have remanded the case to the RTC
for partition of Alfonsos estate. They argued that the CA should not
have applied the Civil Code general provision on contracts, but the
special provisions dealing with succession and partition. They
contended that contrary to the ruling of the CA, the extra-judicial
parition was not an act of strict dominion, as it has been ruled that
partition of inherited land is not a conveyance but a confirmation or
ratification of title or right to the land.46 Therefore, the law requiring
a special power of attorney should not be applied to partitions.
On the other hand, the Heirs of Policronio insisted that the CA
pronouncement on the invalidity of the Deed of Extra-Judicial
Partition should not be disturbed because the subject properties
should not have been included in the estate of Alfonso, and
because Conrado lacked the written authority to represent his
siblings. They argued with the CA in ruling that a special power of
attorney was required before Conrado could sign in behalf of his
co-heirs.
The Heirs of Policronio denied that they ratified the Deed of Extra-
Judicial Partition. They claimed that there is nothing on record that
establishes that they ratified the partition. Far from doing so, they
precisely questioned its execution by filing a complaint. They
further argued that under Article 1409 (3) of the Civil Code,
ratification cannot be invoked to validate the illegal act of including
in the partition those properties which do not belong to the estate
as it provides another mode of acquiring ownership not sanctioned
by law.
Furthermore, the Heirs of Policronio contended that the defenses
of unenforceability, ratification, and preterition are being raised for
the first time on appeal by the Heirs of Alfonso. For having failed to
raise them during the trial, the Heirs of Alfonso should be deemed
to have waived their right to do so.
The Court agrees in part with the Heirs of Alfonso.
To begin, although the defenses of unenforceability, ratification and
preterition were raised by the Heirs of Alfonso for the first time on
appeal, they are concomitant matters which may be taken up. As
long as the questioned items bear relevance and close relation to
those specifically raised, the interest of justice would dictate that
they, too, must be considered and resolved. The rule that only
theories raised in the initial proceedings may be taken up by a
party thereto on appeal should refer to independent, not
concomitant matters, to support or oppose the cause of action. 47
In the RTC, the Heirs of Policronio alleged that Conrados consent
was vitiated by mistake and undue influence, and that he signed
the Deed of Extra-Judicial Partition without the authority or consent
of his co-heirs.
The RTC found that Conrados credibility had faltered, and his
claims were rejected by the RTC as gratuitous assertions. On the
basis of such, the RTC ruled that Conrado duly represented his
siblings in the Deed of Extra-Judicial Partition.
On the other hand, the CA annulled the Deed of Extra-Judicial
Partition under Article 1390 (1) of the Civil Code, holding that a
special power of attorney was lacking as required under Article
1878 (5) and (15) of the Civil Code. These articles are as follows:
Art. 1878. Special powers of attorney are necessary in the
following cases:
xxx
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
xxx
(15) Any other act of strict dominion.
Art. 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent
to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper
action in court. They are susceptible of ratification.
This Court finds that Article 1878 (5) and (15) is inapplicable to the
case at bench. It has been held in several cases48 that partition
among heirs is not legally deemed a conveyance of real property
resulting in change of ownership. It is not a transfer of property
from one to the other, but rather, it is a confirmation or ratification
of title or right of property that an heir is renouncing in favor of
another heir who accepts and receives the inheritance. It is merely
a designation and segregation of that part which belongs to each
heir. The Deed of Extra-Judicial Partition cannot, therefore, be
considered as an act of strict dominion. Hence, a special power of
attorney is not necessary.
In fact, as between the parties, even an oral partition by the heirs
is valid if no creditors are affected. The requirement of a written
memorandum under the statute of frauds does not apply to
partitions effected by the heirs where no creditors are involved
considering that such transaction is not a conveyance of property
resulting in change of ownership but merely a designation and
segregation of that part which belongs to each heir.49
Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates
the incapacity of a party to give consent to a contract. What is
involved in the case at bench though is not Conrados incapacity to
give consent to the contract, but rather his lack of authority to do
so. Instead, Articles 1403 (1), 1404, and 1317 of the Civil Code
find application to the circumstances prevailing in this case. They
are as follows:
Art. 1403. The following contracts are unenforceable, unless they
are ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers;
Art. 1404. Unauthorized contracts are governed by Article 1317
and the principles of agency in Title X of this Book.
Art. 1317. No one may contract in the name of another without
being authorized by the latter, or unless he has by law a right to
represent him.
A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
Such was similarly held in the case of Badillo v. Ferrer:
The Deed of Extrajudicial Partition and Sale is not a voidable or an
annullable contract under Article 1390 of the New Civil Code.
Article 1390 renders a contract voidable if one of the parties is
incapable of giving consent to the contract or if the contracting
partys consent is vitiated by mistake, violence, intimidation, undue
influence or fraud. x x x
The deed of extrajudicial parition and sale is an unenforceable or,
more specifically, an unauthorized contract under Articles 1403(1)
and 1317 of the New Civil Code.50
Therefore, Conrados failure to obtain authority from his co-heirs to
sign the Deed of Extra-Judicial Partition in their behalf did not
result in his incapacity to give consent so as to render the contract
voidable, but rather, it rendered the contract valid but
unenforceable against Conrados co-heirs for having been entered
into without their authority.
A closer review of the evidence on record, however, will show that
the Deed of Extra-Judicial Partition is not unenforceable but, in
fact, valid, binding and enforceable against all the Heirs of
Policronio for having given their consent to the contract. Their
consent to the Deed of Extra-Judicial Partition has been proven by
a preponderance of evidence.
Regarding his alleged vitiated consent due to mistake and undue
influence to the Deed of Extra-Judicial Partition, Conrado testified,
to wit:
Q: Mr. Ureta you remember having signed a document entitled
deed of extra judicial partition consisting of 11 pages and which
have previously [been] marked as Exhibit I for the plaintiffs?
A: Yes sir.
Q: Can you recall where did you sign this document?
A: The way I remember I signed that in our house.
Q: And who requested or required you to sign this document?
A: My aunties.
Q: Who in particular if you can recall?
A: Nay Pruding Panadero.
Q: You mean that this document that you signed was brought to
your house by your Auntie Pruding Pa[r]adero [who] requested you
to sign that document?
A: When she first brought that document I did not sign that said
document because I [did] no[t] know the contents of that
document.
Q: How many times did she bring this document to you [until] you
finally signed the document?
A: Perhaps 3 times.
Q: Can you tell the court why you finally signed it?
A: Because the way she explained it to me that the land of my
grandfather will be partitioned.
Q: When you signed this document were your brothers and sisters
who are your co-plaintiffs in this case aware of your act to sign this
document?
A: They do not know.
xxx
Q: After you have signed this document did you inform your
brothers and sisters that you have signed this document?
No I did not. 51
xxx
Q: Now you read the document when it was allegedly brought to
your house by your aunt Pruding Pa[r]adero?
A: I did not read it because as I told her I still want to ask the
advise of my brothers and sisters.
Q: So do I get from you that you have never read the document
itself or any part thereof?
A: I have read the heading.
xxx
Q: And why is it that you did not read all the pages of this
document because I understand that you know also how to read in
English?
A: Because the way Nay Pruding explained to me is that the
property of my grandfather will be partitioned that is why I am so
happy.
xxx
Q: You mean to say that after you signed this deed of extra judicial
partition up to the present you never informed them?
A: Perhaps they know already that I have signed and they read
already the document and they have read the document.
Q: My question is different, did you inform them?
A: The document sir? I did not tell them.
Q: Even until now?
A: Until now I did not inform them.52
This Court finds no cogent reason to reverse the finding of the
RTC that Conrados explanations were mere gratuitous assertions
not entitled to any probative weight. The RTC found Conrados
credibility to have faltered when he testified that perhaps his
siblings were already aware of the Deed of Extra-Judicial Partition.
The RTC was in the best position to judge the credibility of the
witness testimony. The CA also recognized that Conrados
consent was not vitiated by mistake and undue influence as it
required a special power of attorney in order to bind his co-heirs
and, as such, the CA thereby recognized that his signature was
binding to him but not with respect to his co-heirs. Findings of fact
of the trial court, particularly when affirmed by the CA, are binding
to this Court.53
Furthermore, this Court notes other peculiarities in Conrados
testimony. Despite claims of undue influence, there is no indication
that Conrado was forced to sign by his aunt, Prudencia Paradero.
In fact, he testified that he was happy to sign because his
grandfathers estate would be partitioned. Conrado, thus, clearly
understood the document he signed. It is also worth noting that
despite the document being brought to him on three separate
occasions and indicating his intention to inform his siblings about
it, Conrado failed to do so, and still neglected to inform them even
after he had signed the partition. All these circumstances negate
his claim of vitiated consent. Having duly signed the Deed of Extra-
Judicial Partition, Conrado is bound to it. Thus, it is enforceable
against him.
Although Conrados co-heirs claimed that they did not authorize
Conrado to sign the Deed of Extra-Judicial Partition in their behalf,
several circumstances militate against their contention.
First, the Deed of Extra-Judicial Partition was executed on April 19,
1989, and the Heirs of Policronio claim that they only came to
know of its existence on July 30, 1995 through an issue of the
Aklan Reporter. It is difficult to believe that Conrado did not inform
his siblings about the Deed of Extra-Judicial Partition or at least
broach its subject with them for more than five years from the time
he signed it, especially after indicating in his testimony that he had
intended to do so.
Second, Conrado retained possession of one of the parcels of land
adjudicated to him and his co-heirs in the Deed of Extra-Judicial
Partition.
Third, after the execution of the partition on April 19, 1989 and
more than a year before they claimed to have discovered the
existence of the Deed of Extra-Judicial Partition on July 30, 1995,
some of the Heirs of Policronio, namely, Rita Solano, Macario
Ureta, Lilia Tayco, and Venancio Ureta executed on June 1, 1994,
a Special Power of Attorney54 in favor of their sister Gloria
Gonzales, authorizing her to obtain a loan from a bank and to
mortgage one of the parcels of land adjudicated to them in the
Deed of Extra-Judicial Partition to secure payment of the loan.
They were able to obtain the loan using the land as collateral, over
which a Real Estate Mortgage55 was constituted. Both the Special
Power of Attorney and the Real Estate Mortgage were presented
in evidence in the RTC, and were not controverted or denied by
the Heirs of Policronio.
Fourth, in the letter dated August 15, 1995, sent by the counsel of
the Heirs of Policronio to the Heirs of Alfonso requesting for
amicable settlement, there was no mention that Conrados consent
to the Deed of Extra-Judicial Partition was vitiated by mistake and
undue influence or that they had never authorized Conrado to
represent them or sign the document on their behalf. It is
questionable for such a pertinent detail to have been omitted. The
body of said letter is reproduced hereunder as follows:
Greetings:
Your nephews and nieces, children of your deceased brother
Policronio Ureta, has referred to me for appropriate legal action the
property they inherited from their father consisting of six (6) parcels
of land which is covered by a Deed of Absolute Sale dated October
25, 1969. These properties ha[ve] already been transferred to the
name of their deceased father immediately after the sale, machine
copy of the said Deed of Sale is hereto attached for your ready
reference.
Lately, however, there was published an Extra-judicial Partition of
the estate of Alfonso Ureta, which to the surprise of my clients
included the properties already sold to their father before the death
of said Alfonso Ureta. This inclusion of their property is erroneous
and illegal because these properties were covered by the Deed of
Absolute Sale in favor of their father Policronio Ureta no longer
form part of the estate of Alfonso Ureta. Since Policronio Ureta has
[sic] died in 1974 yet, these properties have passed by hereditary
succession to his children who are now the true and lawful owners
of the said properties.
My clients are still entitled to a share in the estate of Alfonso Ureta
who is also their grandfather as they have stepped into the shoes
of their deceased father Policronio Ureta. But this estate of Alfonso
Ureta should already exclude the six (6) parcels of land covered by
the Deed of Absolute Sale in favor of Policronio Ureta.
My clients cannot understand why the properties of their late father
[should] be included in the estate of their grandfather and be
divided among his brothers and sisters when said properties
should only be divided among themselves as children of Policronio
Ureta.
Since this matter involves very close members of the same family,
I have counseled my clients that an earnest effort towards a
compromise or amicable settlement be first explored before resort
to judicial remedy is pursued. And a compromise or amicable
settlement can only be reached if all the parties meet and discuss
the problem with an open mind. To this end, I am suggesting a
meeting of the parties on September 16, 1995 at 2:00 P.M. at B
Place Restaurant at C. Laserna St., Kalibo, Aklan. It would be best
if the parties can come or be represented by their duly designated
attorney-in-fact together with their lawyers if they so desire so that
the problem can be discussed unemotionally and intelligently.
I would, however, interpret the failure to come to the said meeting
as an indication that the parties are not willing to or interested in
amicable settlement of this matter and as a go signal for me to
resort to legal and/or judicial remedies to protest the rights of my
clients.
Thank you very much.56
Based on the foregoing, this Court concludes that the allegation of
Conrados vitiated consent and lack of authority to sign in behalf of
his co-heirs was a mere afterthought on the part of the Heirs of
Policronio. It appears that the Heirs of Policronio were not only
aware of the existence of the Deed of Extra-Judicial Partition prior
to June 30, 1995 but had, in fact, given Conrado authority to sign
in their behalf. They are now estopped from questioning its legality,
and the Deed of Extra-Judicial Partition is valid, binding, and
enforceable against them.
In view of the foregoing, there is no longer a need to discuss the
issue of ratification.
Preterition
The Heirs of Alfonso were of the position that the absence of the
Heirs of Policronio in the partition or the lack of authority of their
representative results, at the very least, in their preterition and not
in the invalidity of the entire deed of partition. Assuming there was
actual preterition, it did not render the Deed of Extra-Judicial
Partition voidable. Citing Article 1104 of the Civil Code, they aver
that a partition made with preterition of any of the compulsory heirs
shall not be rescinded, but the heirs shall be proportionately
obliged to pay the share of the person omitted. Thus, the Deed of
Extra-Judicial Partition should not have been annulled by the CA.
Instead, it should have ordered the share of the heirs omitted to be
given to them.
The Heirs of Alfonso also argued that all that remains to be
adjudged is the right of the preterited heirs to represent their father,
Policronio, and be declared entitled to his share. They contend that
remand to the RTC is no longer necessary as the issue is purely
legal and can be resolved by the provisions of the Civil Code for
there is no dispute that each of Alfonsos heirs received their
rightful share. Conrado, who received Policronios share, should
then fully account for what he had received to his other co-heirs
and be directed to deliver their share in the inheritance.
These arguments cannot be given credence.
Their posited theory on preterition is no longer viable. It has
already been determined that the Heirs of Policronio gave their
consent to the Deed of Extra-Judicial Partition and they have not
been excluded from it. Nonetheless, even granting that the Heirs of
Policronio were denied their lawful participation in the partition, the
argument of the Heirs of Alfonso would still fail.
Preterition under Article 854 of the Civil Code is as follows:
Art. 854. The preterition or omission of one, some, or all of the
compulsory heirs in the direct line, whether living at the time of the
execution of the will or born after the death of the testator, shall
annul the institution of heir; but the devises and legacies shall be
valid insofar as they are not inofficious.
If the omitted compulsory heirs should die before the testator, the
institution shall be effectual, without prejudice to the right of
representation.
Preterition has been defined as the total omission of a compulsory
heir from the inheritance.1wphi1 It consists in the silence of the
testator with regard to a compulsory heir, omitting him in the
testament, either by not mentioning him at all, or by not giving him
anything in the hereditary property but without expressly
disinheriting him, even if he is mentioned in the will in the latter
case.57 Preterition is thus a concept of testamentary succession
and requires a will. In the case at bench, there is no will involved.
Therefore, preterition cannot apply.
Remand Unnecessary
The Deed of Extra-Judicial Partition is in itself valid for complying
with all the legal requisites, as found by the RTC, to wit:
A persual of the Deed of Extra-judicial Partition would reveal that
all the heirs and children of Alfonso Ureta were represented
therein; that nobody was left out; that all of them received as much
as the others as their shares; that it distributed all the properties of
Alfonso Ureta except a portion of parcel 29 containing an area of
14,000 square meters, more or less, which was expressly
reserved; that Alfonso Ureta, at the time of his death, left no debts;
that the heirs of Policronio Ureta, Sr. were represented by Conrado
B. Ureta; all the parties signed the document, was witnessed and
duly acknowledged before Notary Public Adolfo M. Iligan of Kalibo,
Aklan; that the document expressly stipulated that the heirs to
whom some of the properties were transferred before for taxation
purposes or their children, expressly recognize and acknowledge
as a fact that the properties were transferred only for the purpose
of effective administration and development convenience in the
payment of taxes and, therefore, all instruments conveying or
effecting the transfer of said properties are null and void from the
beginning (Exhs. 1-4, 7-d).58
Considering that the Deed of Sale has been found void and the
Deed of Extra-Judicial Partition valid, with the consent of all the
Heirs of Policronio duly given, there is no need to remand the case
to the court of origin for partition.1vvph!1
WHEREFORE, the petition in G.R. No. 165748 is DENIED. The
petition in G.R. No. 165930 is GRANTED. The assailed April 20,
2004 Decision and October 14, 2004 Resolution of the Court of
Appeals in CA-G.R. CV No. 71399, are hereby MODIFIED in this
wise:
(1) The Deed of Extra-Judicial Partition, dated April 19,
1989, is VALID, and
(2) The order to remand the case to the court of origin is
hereby DELETED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 174012 November 14, 2008
MACTAN-CEBU INTERNATIONAL AIRPORT
AUTHORITY, petitioner,
vs.
BENJAMIN TUDTUD, BIENVENIDO TUDTUD, DAVID TUDTUD,
JUSTINIANO BORGA, JOSE BORGA, and FE DEL ROSARIO,
represented by LYDIA ADLAWAN, Attorney-in-fact,respondents.
DECISION
CARPIO MORALES, J.:
The predecessors-in-interest of respondents Benjamin Tudtud et
al. were the owners of a parcel of land in Cebu City, identified as
Lot No. 988 of the Banilad Estate and covered by Transfer
Certificate of Title (TCT) No. 27692.
In 1949, the National Airports Corporation (NAC), a public
corporation of the Republic of the Philippines, embarked on a
program to expand the Cebu Lahug Airport. For this purpose, it
sought to acquire, by negotiated sale or expropriation, several lots
adjoining the then existing airport.
By virtue of a judgment rendered by the third branch of the Court
of First Instance in Civil Case No. R-1881, the NAC acquired Lot
No. 988, among other lots. TCT No. 26792 covering Lot No. 988
was thus cancelled and TCT No. 27919 was issued in its stead in
the name of the Republic of the Philippines. No structures related
to the operation of the Cebu Lahug Airport were constructed on Lot
No. 988.
Lot No. 988 was later transferred to the Air Transport Office (ATO),
and still later to petitioner Mactan Cebu International Airport
Authority (MCIAA) in 1990 via Republic Act No. 6958.
When the Mactan International Airport at Lapu Lapu City was
opened for commercial flights, the Cebu Lahug Airport was closed
and abandoned and a significant area thereof was purchased by
the Cebu Property Ventures, Inc. for development as a commercial
complex.
By letter of October 7, 1996 to the general manager of the MCIAA,
Lydia Adlawan, acting as attorney-in-fact of the original owners of
Lot No. 988, demanded to repurchase the lot at the same price
paid at the time of the taking, without interest, no structures or
improvements having been erected thereon and the Cebu Lahug
Airport having been closed and abandoned, hence, the purpose for
which the lot was acquired no longer existed.1
As the demand remained unheeded, respondents, represented by
their attorney-in-fact Lydia Adlawan, filed a Complaint 2 before the
Regional Trial Court (RTC) of Cebu City, docketed as Civil Case
No. CEB-19464, for reconveyance and damages with application
for preliminary injunction/restraining order against the MCIAA.
Respondents anchored their complaint on the assurance they
claimed was made by the NAC that the original owners and/or their
successors-in-interest would be entitled to repurchase the lot when
and in the event that it was no longer used for airport purposes. 3
In its Answer with Counterclaim,4 the MCIAA countered that, inter
alia, the decision in Civil Case No. R-1881 did not lay any
condition that the lots subject of expropriation would revert to their
owners in case the expansion of the Cebu Lahug Airport would not
materialize.5
To prove their claim, respondents presented witnesses who
testified that the NAC promised their predecessors-in-interest-
original owners of Lot No. 988 that it would be returned to them
should the expansion of the Cebu Lahug Airport not
materialize.6 And respondents invoked this Court's ruling inMCIAA
v. Court of Appeals7 involving another lot acquired by the NAC for
the expansion of the Cebu Lahug Airport. In that case, although
the deed of sale between the therein respondent Melba Limbaco's
predecessor-in-interest and NAC did not contain a provision for the
repurchase of the therein subject lot should the purpose for its
acquisition ceased to exist, this Court allowed Melba Limbaco to
recover the lot based on parole evidence that the NAC promised
the right of repurchase to her predecessor-in-interest. 8
The MCIAA disputed the applicability to the present case of the
immediately-cited MCIAA ruling, the NAC having acquired Lot No.
988 not by a deed of sale but by virtue of a final judicial decree of
expropriation which cannot be modified by parole evidence.9
After trial, Branch 20 of the Cebu City RTC rendered judgment in
favor of respondents, disposing as follows:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiffs as against
defendant ordering the latter to reconvey the entire
subject real property covered by T.C.T. No. 27919 within
15 days from receipt of this decision.
SO ORDERED.10 (Underscoring supplied)
On appeal,11 the Court of Appeals, by Decision of May 8,
200612 affirmed the RTC decision. Its Motion for
Reconsideration13 having been denied,14 the MCIAA filed the
present petition,15 faulting the appellate court in "disregarding" the
following considerations:
I.
THE JUDGMENT OF EXPROPRIATION IN CIVIL CASE
NO. R-1881 WAS ABSOLUTE AND UNCONDITIONAL.
II.
RESPONDENTS' CLAIM OF ALLEGED VERBAL
ASSURANCES FROM THE GOVERNMENTVIOLATES
THE STATUTE OF FRAUDS.
III.
THE BEST EVIDENCE SHOWING
THE UNCONDITIONAL ACQUISITION OF LOT 988 IS
THE CERTIFICATE OF TITLE.16 (Underscoring supplied)
In insisting that the judgment in Civil Case No. R-1881 was
absolute and unconditional, the MCIAA cites Fery v. Municipality of
Cabanatuan17 which held that:
x x x If x x x the decree of expropriation gives to the
entity a fee simple title, then, of course, the land
becomes the absolute property of the expropriator,
whether it be the State, a province, or municipality, and in
that case the non-user does not have the effect of
defeating the title acquired by the expropriation
proceedings.
When land has been acquired for public use in fee
simple, unconditionally, either by the exercise of eminent
domain or by purchase, the former owner retains no
rights in the land, and the public use may be abandoned,
or the land may be devoted to a different use, without
any impairment of the estate or title acquired, or any
reversion to the former owner.18 (Italics in the original;
underscoring supplied)
MCIAA in fact offers the text of the trial court's decision in R-1881,
inviting attention to the dispositive portion thereof, to prove that the
judgment of expropriation entered in favor of the government is
absolute and unconditional, and that there is nothing in the
decision that would show that the government made any
assurance or stipulation whatsoever to reconvey the subject lot in
case the expansion of the Lahug airport would not materialize.19
But also in Fery, this Court, passing on the question of whether a
private land which is expropriated for a particular public use, but
which particular public use is abandoned, may be returned to its
former owner, held:
The answer to that question depends upon the character
of the title acquired by the expropriator x x x. If, for
example, land is expropriated for a particular
purpose, with the condition that when that purpose is
ended or abandoned the property shall return to its
former owner, then, of course, when the purpose is
terminated or abandoned, the former owner reacquires
the property so expropriated. If, for example, land is
expropriated for a public street and the expropriation is
granted upon conditions that the city can only use it for a
public street, then, of course, when the city abandons its
use as a public street, it returns to the former owner,
unless there is some statutory provision to the
contrary.20 (Underscoring supplied)
That nothing in the trial court's decision in Civil Case No. R-1881
indicates a condition attached to the expropriation of the subject
lot, this Court, in Heirs of Timoteo Moreno v. MCIAA21 involving the
rights of another former owner of lots also involved in Civil Case
No. R-1881, noting the following portion of the body of the said trial
court's decision:
As for the public purpose of the expropriation proceeding,
it cannot now be doubted. Although the Mactan Airport is
being constructed, it does not take away the actual
usefulness and importance of the Lahug Airport: it is
handling the air traffic both civilian and military. From it
aircrafts fly to Mindanao and Visayas and pass through it
on their return flights to the North and Manila. Then, no
evidence was adduced to show how soon is the Mactan
Airport to be placed in operation and whether the Lahug
Airport will be closed immediately thereafter. It is for the
other departments of the Government to determine said
matters. The Court cannot substitute its judgment for
those of the said departments and agencies. In the
absence of such a showing, the Court will presume that
the Lahug Airport will continue to be in operation,22
held:
While the trial court in Civil Case No. R-1881 could have
simply acknowledged the presence of public purpose for
the exercise of eminent domain regardless of the survival
of Lahug Airport,the trial court in its Decision chose not to
do so but instead prefixed its finding of public purpose
 upon its understanding that "Lahug Airport will continue
to be in operation." Verily, these meaningful statements in
the body of the Decision warrant the conclusion that the
expropriated properties would remain to be so until it was
confirmed that Lahug Airport was no longer "in
operation". This inference further implies two (2) things:
(a) after the Lahug Airport ceased its undertaking as such
and the expropriated lots were not being used for any
airport expansion project, the rights vis--vis the
expropriated Lots Nos. 916 and 920 as between the
State and their former owners, petitioners herein, must
be equitably adjusted; and, (b) the foregoing
unmistakable declarations in the body of
the Decision should merge with and become an
intrinsic part of the fallo thereof which under the
premises is clearly inadequate since the dispositive
portion is not in accord with the findings as
contained in the body thereof.23
On the Heirs of Moreno's motion for reconsideration, this Court
affirmed its decision, emphasizing that "the fallo of the decision in
Civil Case No. R-1881 must be read in reference to the other
portions of the decision in which it forms a part[,]"24 and that "[a]
reading of the Court's judgment must not be confined to the
dispositive portion alone; rather, it should be meaningfully
construed in unanimity with the ratio decidendi thereof to grasp the
true intent and meaning of a decision."25
The MCIAA goes on, however, to cite MCIAA v. Court of Appeals
and Chiongbian26 wherein this Court rejected testimonial evidence
of an assurance of a right to repurchase property acquired by the
NAC under the judgment in still the same Civil Case No. R-1881.
The MCIAA's reliance on this case is misplaced. As this Court
noted in Heirs of Timoteo Moreno v. MCIAA,27 the
respondent Chiongbianput forth inadmissible and inconclusive
evidence, Chiongbian's testimony as well as that of her witness as
to the existence of the agreement being hearsay.28
In contrast, in the case at bar, respondents' witness respondent
Justiniano Borga himself, who represented his mother-one of the
original owners of subject lot during the negotiations between the
NAC and the landowners, declared that the original owners did not
oppose the expropriation of the lot upon the assurance of the NAC
that they would reacquire it if it is no longer needed by the airport.29
Another witness for respondent, Eugenio Amores, an employee of
the NAC, declared that in the course of some meetings with the
landowners when he accompanied the NAC legal team and was
requested to jot down what transpired thereat, he personally heard
the NAC officials give the assurance claimed by respondents.30
The MCIAA nevertheless urges this Court to reject respondents'
testimonial evidence, citing Article 1403 (2)(e) of the Civil Code
which places agreements for the sale of real property or an interest
therein within the coverage of the Statute of Frauds.
The Statute of Frauds applies, however, only to executory
contracts.31 It does not apply to contracts which have been
completely or partially performed,32 the rationale thereof being as
follows:
x x x In executory contracts there is a wide field for fraud
because unless they be in writing there is no palpable
evidence of the intention of the contracting parties. The
statute has precisely been enacted to prevent fraud.
However, if a contract has been totally or partially
performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would enable the
defendant to keep the benefits already delivered by him
from the transaction in litigation, and, at the same time,
evade the obligations, responsibilities or liabilities
assumed or contracted by him thereby.33 (Underscoring
supplied)
A word on MCIAA's argument that MCIAA v. Court of
Appeals, supra, does not apply to the present case. As reflected in
the earlier-quoted ruling in Fery, the mode of acquisition for public
purpose of a land - whether by expropriation or by contract - is not
material in determining whether the acquisition is with or without
condition.
In fine, the decision in favor of respondents must be affirmed. The
rights and duties between the MCIAA and respondents are
governed by Article 1190 of the Civil Code34 which provides:
When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon
the fulfillment of said conditions, shall return to each
other what they have received.
In case of the loss, deterioration, or improvement of the
thing, the provisions which, with respect to the debtor,
are laid down in the preceding article [Article 1189] shall
be applied to the party who is bound to return.
xxxx
While the MCIAA is obliged to reconvey Lot No. 988 to
respondents, respondents must return to the MCIAA what they
received as just compensation for the expropriation of Lot No. 988,
plus legal interest to be computed from default,35 which in this case
runs from the time the MCIAA complies with its obligation to the
respondents.36
Respondents must likewise pay the MCIAA the necessary
expenses it may have incurred in sustaining Lot No. 988 and the
monetary value of its services in managing it to the extent that
respondents were benefited thereby.
Following Article 118737 of the Civil Code, the MCIAA may keep
whatever income or fruits it may have obtained from Lot No. 988,
and respondents need not account for the interests that the
amounts they received as just compensation may have earned in
the meantime.
In accordance with the earlier-quoted Article 1190 of the Civil Code
vis--vis Article 1189 which provides that "[i]f a thing is improved by
its nature, or by time, the improvement shall inure to the benefit of
the creditor x x x," respondents, as creditors, do not have to settle
as part of the process of restitution the appreciation in value of Lot
988 which is a natural consequence of nature and time.
WHEREFORE, the petition is, in light of the foregoing
disquisition, DENIED. The May 8, 2006 Decision of the Court of
Appeals affirming that of Branch 20 of the Cebu City Regional Trial
Court isAFFIRMED with MODIFICATION as follows:
1. Respondents are ORDERED to return to the MCIAA
the just compensation they received for the expropriation
of Lot No. 988 plus legal interest in the case of default, to
be computed from the time the MCIAA complies with its
obligation to reconvey Lot No. 988 to them;
2. Respondents are ORDERED to pay the MCIAA the
necessary expenses it incurred in sustaining Lot No. 988
and the monetary value of its services to the extent that
respondents were benefited thereby;
3. The MCIAA is ENTITLED to keep whatever fruits and
income it may have obtained from Lot No. 988; and
4. Respondents are also ENTITLED to keep whatever
interests the amounts they received as just
compensation may have earned in the meantime, as well
as the appreciation in value of Lot No. 988 which is a
natural consequence of nature and time;
In light of the foregoing modifications, the case is REMANDED to
Branch 20 the Regional Trial Court of Cebu City only for the
purpose of receiving evidence on the amounts that respondents
will have to pay to the MCIAA in accordance with this Court's
decision.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 176625
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and
AIR TRANSPORTATION OFFICE, Petitioners,
vs.
BERNARDO L. LOZADA, SR., and the HEIRS OF ROSARIO
MERCADO, namely, VICENTE LOZADA, MARIO M. LOZADA,
MARCIA L. GODINEZ, VIRGINIA L. FLORES, BERNARDO
LOZADA, JR., DOLORES GACASAN, SOCORRO CAFARO and
ROSARIO LOZADA, represented by MARCIA LOZADA
GODINEZ, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court, seeking to reverse, annul, and set aside the
Decision1 dated February 28, 2006 and the Resolution2 dated
February 7, 2007 of the Court of Appeals (CA) (Cebu City),
Twentieth Division, in CA-G.R. CV No. 65796.
The antecedent facts and proceedings are as follows:
Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with
an area of 1,017 square meters, more or less, located in Lahug,
Cebu City. Its original owner was Anastacio Deiparine when the
same was subject to expropriation proceedings, initiated by the
Republic of the Philippines (Republic), represented by the then
Civil Aeronautics Administration (CAA), for the expansion and
improvement of the Lahug Airport. The case was filed with the then
Court of First Instance of Cebu, Third Branch, and docketed as
Civil Case No. R-1881.
As early as 1947, the lots were already occupied by the U.S. Army.
They were turned over to the Surplus Property Commission, the
Bureau of Aeronautics, the National Airport Corporation and then
to the CAA.
During the pendency of the expropriation proceedings, respondent
Bernardo L. Lozada, Sr. acquired Lot No. 88 from Deiparine.
Consequently, Transfer Certificate of Title (TCT) No. 9045 was
issued in Lozadas name.
On December 29, 1961, the trial court rendered judgment in favor
of the Republic and ordered the latter to pay Lozada the fair
market value of Lot No. 88, adjudged at P3.00 per square meter,
with consequential damages by way of legal interest computed
from November 16, 1947the time when the lot was first occupied
by the airport. Lozada received the amount of P3,018.00 by way of
payment.
The affected landowners appealed. Pending appeal, the Air
Transportation Office (ATO), formerly CAA, proposed a
compromise settlement whereby the owners of the lots affected by
the expropriation proceedings would either not appeal or withdraw
their respective appeals in consideration of a commitment that the
expropriated lots would be resold at the price they were
expropriated in the event that the ATO would abandon the Lahug
Airport, pursuant to an established policy involving similar cases.
Because of this promise, Lozada did not pursue his appeal.
Thereafter, Lot No. 88 was transferred and registered in the name
of the Republic under TCT No. 25057.
The projected improvement and expansion plan of the old Lahug
Airport, however, was not pursued.
Lozada, with the other landowners, contacted then CAA Director
Vicente Rivera, Jr., requesting to repurchase the lots, as per
previous agreement. The CAA replied that there might still be a
need for the Lahug Airport to be used as an emergency DC-3
airport. It reiterated, however, the assurance that "should this
Office dispose and resell the properties which may be found to be
no longer necessary as an airport, then the policy of this Office is
to give priority to the former owners subject to the approval of the
President."
On November 29, 1989, then President Corazon C. Aquino issued
a Memorandum to the Department of Transportation, directing the
transfer of general aviation operations of the Lahug Airport to the
Mactan International Airport before the end of 1990 and, upon
such transfer, the closure of the Lahug Airport.
Sometime in 1990, the Congress of the Philippines passed
Republic Act (R.A.) No. 6958, entitled "An Act Creating the
Mactan-Cebu International Airport Authority, Transferring Existing
Assets of the Mactan International Airport and the Lahug Airport to
the Authority, Vesting the Authority with Power to Administer and
Operate the Mactan International Airport and the Lahug Airport,
and For Other Purposes."
From the date of the institution of the expropriation proceedings up
to the present, the public purpose of the said expropriation
(expansion of the airport) was never actually initiated, realized, or
implemented. Instead, the old airport was converted into a
commercial complex. Lot No. 88 became the site of a jail known as
Bagong Buhay Rehabilitation Complex, while a portion thereof was
occupied by squatters.3 The old airport was converted into what is
now known as the Ayala I.T. Park, a commercial area.1avvphi1
Thus, on June 4, 1996, petitioners initiated a complaint for the
recovery of possession and reconveyance of ownership of Lot No.
88. The case was docketed as Civil Case No. CEB-18823 and was
raffled to the Regional Trial Court (RTC), Branch 57, Cebu City.
The complaint substantially alleged as follows:
(a) Spouses Bernardo and Rosario Lozada were the
registered owners of Lot No. 88 covered by TCT No.
9045;
(b) In the early 1960s, the Republic sought to acquire by
expropriation Lot No. 88, among others, in connection
with its program for the improvement and expansion of
the Lahug Airport;
(c) A decision was rendered by the Court of First Instance
in favor of the Government and against the land owners,
among whom was Bernardo Lozada, Sr. appealed
therefrom;
(d) During the pendency of the appeal, the parties
entered into a compromise settlement to the effect that
the subject property would be resold to the original owner
at the same price when it was expropriated in the event
that the Government abandons the Lahug Airport;
(e) Title to Lot No. 88 was subsequently transferred to
the Republic of the Philippines (TCT No. 25057);
(f) The projected expansion and improvement of the
Lahug Airport did not materialize;
 (g) Plaintiffs sought to repurchase their property from
then CAA Director Vicente Rivera. The latter replied by
giving as assurance that priority would be given to the
previous owners, subject to the approval of the
President, should CAA decide to dispose of the
properties;
(h) On November 29, 1989, then President Corazon C.
Aquino, through a Memorandum to the Department of
Transportation and Communications (DOTC), directed
the transfer of general aviation operations at the Lahug
Airport to the Mactan-Cebu International Airport Authority;
(i) Since the public purpose for the expropriation no
longer exists, the property must be returned to the
plaintiffs.4
In their Answer, petitioners asked for the immediate dismissal of
the complaint. They specifically denied that the Government had
made assurances to reconvey Lot No. 88 to respondents in the
event that the property would no longer be needed for airport
operations. Petitioners instead asserted that the judgment of
condemnation was unconditional, and respondents were,
therefore, not entitled to recover the expropriated property
notwithstanding non-use or abandonment thereof.
After pretrial, but before trial on the merits, the parties stipulated on
the following set of facts:
(1) The lot involved is Lot No. 88-SWO-25042 of the
Banilad Estate, situated in the City of Cebu, containing
an area of One Thousand Seventeen (1,017) square
meters, more or less;
(2) The property was expropriated among several other
properties in Lahug in favor of the Republic of the
Philippines by virtue of a Decision dated December 29,
1961 of the CFI of Cebu in Civil Case No. R-1881;
(3) The public purpose for which the property was
expropriated was for the purpose of the Lahug Airport;
(4) After the expansion, the property was transferred in
the name of MCIAA; [and]
(5) On November 29, 1989, then President Corazon C.
Aquino directed the Department of Transportation and
Communication to transfer general aviation operations of
the Lahug Airport to the Mactan-Cebu International
Airport Authority and to close the Lahug Airport after such
transfer[.]5
During trial, respondents presented Bernardo Lozada, Sr. as their
lone witness, while petitioners presented their own witness,
Mactan-Cebu International Airport Authority legal assistant Michael
Bacarisas.
On October 22, 1999, the RTC rendered its Decision, disposing as
follows:
WHEREFORE, in the light of the foregoing, the Court hereby
renders judgment in favor of the plaintiffs, Bernardo L. Lozada, Sr.,
and the heirs of Rosario Mercado, namely, Vicente M. Lozada,
Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr.,
Dolores L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada,
represented by their attorney-in-fact Marcia Lozada Godinez, and
against defendants Cebu-Mactan International Airport Authority
(MCIAA) and Air Transportation Office (ATO):
1. ordering MCIAA and ATO to restore to plaintiffs the
possession and ownership of their land, Lot No. 88 Psd-
821 (SWO-23803), upon payment of the expropriation
price to plaintiffs; and
2. ordering the Register of Deeds to effect the transfer of
the Certificate of Title from defendant[s] to plaintiffs on
Lot No. [88], cancelling TCT No. 20357 in the name of
defendant MCIAA and to issue a new title on the same lot
in the name of Bernardo L. Lozada, Sr. and the heirs of
Rosario Mercado, namely: Vicente M. Lozada, Mario M.
Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo
M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro
and Rosario M. Lozada.
No pronouncement as to costs.
SO ORDERED.6
Aggrieved, petitioners interposed an appeal to the CA. After the
filing of the necessary appellate briefs, the CA rendered its
assailed Decision dated February 28, 2006, denying petitioners
appeal and affirming in toto the Decision of the RTC, Branch 57,
Cebu City. Petitioners motion for reconsideration was, likewise,
denied in the questioned CA Resolution dated February 7, 2007.
Hence, this petition arguing that: (1) the respondents utterly failed
to prove that there was a repurchase agreement or compromise
settlement between them and the Government; (2) the judgment in
Civil Case No. R-1881 was absolute and unconditional, giving title
in fee simple to the Republic; and (3) the respondents claim of
verbal assurances from government officials violates the Statute of
Frauds.
The petition should be denied.
Petitioners anchor their claim to the controverted property on the
supposition that the Decision in the pertinent expropriation
proceedings did not provide for the condition that should the
intended use of Lot No. 88 for the expansion of the Lahug Airport
be aborted or abandoned, the property would revert to
respondents, being its former owners. Petitioners cite, in support of
this position, Fery v. Municipality of Cabanatuan,7 which declared
that the Government acquires only such rights in expropriated
parcels of land as may be allowed by the character of its title over
the properties
If x x x land is expropriated for a particular purpose, with the
condition that when that purpose is ended or abandoned the
property shall return to its former owner, then, of course, when the
purpose is terminated or abandoned the former owner reacquires
the property so expropriated. If x x x land is expropriated for a
public street and the expropriation is granted upon condition that
the city can only use it for a public street, then, of course, when the
city abandons its use as a public street, it returns to the former
owner, unless there is some statutory provision to the contrary. x x
x. If, upon the contrary, however, the decree of expropriation gives
to the entity a fee simple title, then, of course, the land becomes
the absolute property of the expropriator, whether it be the State, a
province, or municipality, and in that case the non-user does not
have the effect of defeating the title acquired by the expropriation
proceedings. x x x.
When land has been acquired for public use in fee simple,
unconditionally, either by the exercise of eminent domain or by
purchase, the former owner retains no right in the land, and the
public use may be abandoned, or the land may be devoted to a
different use, without any impairment of the estate or title acquired,
or any reversion to the former owner. x x x.8
Contrary to the stance of petitioners, this Court had ruled
otherwise in Heirs of Timoteo Moreno and Maria Rotea v. Mactan-
Cebu International Airport Authority,9 thus
Moreover, respondent MCIAA has brought to our attention a
significant and telling portion in the Decision in Civil Case No. R-
1881 validating our discernment that the expropriation by the
predecessors of respondent was ordered under the running
impression that Lahug Airport would continue in operation
As for the public purpose of the expropriation proceeding, it cannot
now be doubted. Although Mactan Airport is being constructed, it
does not take away the actual usefulness and importance of the
Lahug Airport: it is handling the air traffic both civilian and military.
From it aircrafts fly to Mindanao and Visayas and pass thru it on
their flights to the North and Manila. Then, no evidence was
adduced to show how soon is the Mactan Airport to be placed in
operation and whether the Lahug Airport will be closed
immediately thereafter. It is up to the other departments of the
Government to determine said matters. The Court cannot
substitute its judgment for those of the said departments or
agencies. In the absence of such showing, the Court will presume
that the Lahug Airport will continue to be in operation (emphasis
supplied).
While in the trial in Civil Case No. R-1881 [we] could have simply
acknowledged the presence of public purpose for the exercise of
eminent domain regardless of the survival of Lahug Airport, the
trial court in its Decision chose not to do so but instead prefixed its
finding of public purpose upon its understanding that "Lahug
Airport will continue to be in operation." Verily, these meaningful
statements in the body of the Decision warrant the conclusion that
the expropriated properties would remain to be so until it was
confirmed that Lahug Airport was no longer "in operation." This
inference further implies two (2) things: (a) after the Lahug Airport
ceased its undertaking as such and the expropriated lots were not
being used for any airport expansion project, the rights vis--vis
the expropriated Lots Nos. 916 and 920 as between the State and
their former owners, petitioners herein, must be equitably adjusted;
and (b) the foregoing unmistakable declarations in the body of the
Decision should merge with and become an intrinsic part of the
fallo thereof which under the premises is clearly inadequate since
the dispositive portion is not in accord with the findings as
contained in the body thereof.10
Indeed, the Decision in Civil Case No. R-1881 should be read in its
entirety, wherein it is apparent that the acquisition by the Republic
of the expropriated lots was subject to the condition that the Lahug
Airport would continue its operation. The condition not having
materialized because the airport had been abandoned, the former
owner should then be allowed to reacquire the expropriated
property.11
On this note, we take this opportunity to revisit our ruling in Fery,
which involved an expropriation suit commenced upon parcels of
land to be used as a site for a public market. Instead of putting up
a public market, respondent Cabanatuan constructed residential
houses for lease on the area. Claiming that the municipality lost its
right to the property taken since it did not pursue its public
purpose, petitioner Juan Fery, the former owner of the lots
expropriated, sought to recover his properties. However, as he had
admitted that, in 1915, respondent Cabanatuan acquired a fee
simple title to the lands in question, judgment was rendered in
favor of the municipality, following American jurisprudence,
particularly City of Fort Wayne v. Lake Shore & M.S. RY.
Co.,12McConihay v. Theodore Wright,13 and Reichling v. Covington
Lumber Co.,14 all uniformly holding that the transfer to a third party
of the expropriated real property, which necessarily resulted in the
abandonment of the particular public purpose for which the
property was taken, is not a ground for the recovery of the same
by its previous owner, the title of the expropriating agency being
one of fee simple.
Obviously, Fery was not decided pursuant to our now sacredly
held constitutional right that private property shall not be taken for
public use without just compensation.15 It is well settled that the
taking of private property by the Governments power of eminent
domain is subject to two mandatory requirements: (1) that it is for a
particular public purpose; and (2) that just compensation be paid to
the property owner. These requirements partake of the nature of
implied conditions that should be complied with to enable the
condemnor to keep the property expropriated.16
More particularly, with respect to the element of public use, the
expropriator should commit to use the property pursuant to the
purpose stated in the petition for expropriation filed, failing which, it
should file another petition for the new purpose. If not, it is then
incumbent upon the expropriator to return the said property to its
private owner, if the latter desires to reacquire the same.
Otherwise, the judgment of expropriation suffers an intrinsic flaw,
as it would lack one indispensable element for the proper exercise
of the power of eminent domain, namely, the particular public
purpose for which the property will be devoted. Accordingly, the
private property owner would be denied due process of law, and
the judgment would violate the property owners right to justice,
fairness, and equity.
In light of these premises, we now expressly hold that the taking of
private property, consequent to the Governments exercise of its
power of eminent domain, is always subject to the condition that
the property be devoted to the specific public purpose for which it
was taken. Corollarily, if this particular purpose or intent is not
initiated or not at all pursued, and is peremptorily abandoned, then
the former owners, if they so desire, may seek the reversion of the
property, subject to the return of the amount of just compensation
received. In such a case, the exercise of the power of eminent
domain has become improper for lack of the required factual
justification.17
Even without the foregoing declaration, in the instant case, on the
question of whether respondents were able to establish the
existence of an oral compromise agreement that entitled them to
repurchase Lot No. 88 should the operations of the Lahug Airport
be abandoned, we rule in the affirmative.
It bears stressing that both the RTC, Branch 57, Cebu and the CA
have passed upon this factual issue and have declared, in no
uncertain terms, that a compromise agreement was, in fact,
entered into between the Government and respondents, with the
former undertaking to resell Lot No. 88 to the latter if the
improvement and expansion of the Lahug Airport would not be
pursued. In affirming the factual finding of the RTC to this effect,
the CA declared
Lozadas testimony is cogent. An octogenarian widower-retiree
and a resident of Moon Park, California since 1974, he testified
that government representatives verbally promised him and his
late wife while the expropriation proceedings were on-going that
the government shall return the property if the purpose for the
expropriation no longer exists. This promise was made at the
premises of the airport. As far as he could remember, there were
no expropriation proceedings against his property in 1952 because
the first notice of expropriation he received was in 1962. Based on
the promise, he did not hire a lawyer. Lozada was firm that he was
promised that the lot would be reverted to him once the public use
of the lot ceases. He made it clear that the verbal promise was
made in Lahug with other lot owners before the 1961 decision was
handed down, though he could not name the government
representatives who made the promise. It was just a verbal
promise; nevertheless, it is binding. The fact that he could not
supply the necessary details for the establishment of his assertions
during cross-examination, but that "When it will not be used as
intended, it will be returned back, we just believed in the
government," does not dismantle the credibility and truthfulness of
his allegation. This Court notes that he was 89 years old when he
testified in November 1997 for an incident which happened
decades ago. Still, he is a competent witness capable of
perceiving and making his perception known. The minor lapses are
immaterial. The decision of the competency of a witness rests
primarily with the trial judge and must not be disturbed on appeal
unless it is clear that it was erroneous. The objection to his
competency must be made before he has given any testimony or
as soon as the incompetency becomes apparent. Though Lozada
is not part of the compromise agreement,18 he nevertheless
adduced sufficient evidence to support his claim.19
As correctly found by the CA, unlike in Mactan Cebu International
Airport Authority v. Court of Appeals,20 cited by petitioners, where
respondent therein offered testimonies which were hearsay in
nature, the testimony of Lozada was based on personal knowledge
as the assurance from the government was personally made to
him. His testimony on cross-examination destroyed neither his
credibility as a witness nor the truthfulness of his words.
Verily, factual findings of the trial court, especially when affirmed by
the CA, are binding and conclusive on this Court and may not be
reviewed. A petition for certiorari under Rule 45 of the Rules of
Court contemplates only questions of law and not of fact.21 Not one
of the exceptions to this rule is present in this case to warrant a
reversal of such findings.
As regards the position of petitioners that respondents testimonial
evidence violates the Statute of Frauds, suffice it to state that the
Statute of Frauds operates only with respect to executory
contracts, and does not apply to contracts which have been
completely or partially performed, the rationale thereof being as
follows:
In executory contracts there is a wide field for fraud because
unless they be in writing there is no palpable evidence of the
intention of the contracting parties. The statute has precisely been
enacted to prevent fraud. However, if a contract has been totally or
partially performed, the exclusion of parol evidence would promote
fraud or bad faith, for it would enable the defendant to keep the
benefits already delivered by him from the transaction in litigation,
and, at the same time, evade the obligations, responsibilities or
liabilities assumed or contracted by him thereby.22
In this case, the Statute of Frauds, invoked by petitioners to bar
the claim of respondents for the reacquisition of Lot No. 88, cannot
apply, the oral compromise settlement having been partially
performed. By reason of such assurance made in their favor,
respondents relied on the same by not pursuing their appeal
before the CA. Moreover, contrary to the claim of petitioners, the
fact of Lozadas eventual conformity to the appraisal of Lot No. 88
and his seeking the correction of a clerical error in the judgment as
to the true area of Lot No. 88 do not conclusively establish that
respondents absolutely parted with their property. To our mind,
these acts were simply meant to cooperate with the government,
particularly because of the oral promise made to them.
The right of respondents to repurchase Lot No. 88 may be
enforced based on a constructive trust constituted on the property
held by the government in favor of the former. On this note, our
ruling in Heirs of Timoteo Moreno is instructive, viz.:
Mactan-Cebu International Airport Authority is correct in stating
that one would not find an express statement in the Decision in
Civil Case No. R-1881 to the effect that "the [condemned] lot would
return to [the landowner] or that [the landowner] had a right to
repurchase the same if the purpose for which it was expropriated
is ended or abandoned or if the property was to be used other than
as the Lahug Airport." This omission notwithstanding, and while the
inclusion of this pronouncement in the judgment of condemnation
would have been ideal, such precision is not absolutely necessary
nor is it fatal to the cause of petitioners herein. No doubt, the return
or repurchase of the condemned properties of petitioners could be
readily justified as the manifest legal effect or consequence of the
trial courts underlying presumption that "Lahug Airport will
continue to be in operation" when it granted the complaint for
eminent domain and the airport discontinued its activities.
The predicament of petitioners involves a constructive trust, one
that is akin to the implied trust referred to in Art. 1454 of the Civil
Code, "If an absolute conveyance of property is made in order to
secure the performance of an obligation of the grantor toward the
grantee, a trust by virtue of law is established. If the fulfillment of
the obligation is offered by the grantor when it becomes due, he
may demand the reconveyance of the property to him." In the case
at bar, petitioners conveyed Lots No. 916 and 920 to the
government with the latter obliging itself to use the realties for the
expansion of Lahug Airport; failing to keep its bargain, the
government can be compelled by petitioners to reconvey the
parcels of land to them, otherwise, petitioners would be denied the
use of their properties upon a state of affairs that was not
conceived nor contemplated when the expropriation was
authorized.
Although the symmetry between the instant case and the situation
contemplated by Art. 1454 is not perfect, the provision is
undoubtedly applicable. For, as explained by an expert on the law
of trusts: "The only problem of great importance in the field of
constructive trust is to decide whether in the numerous and varying
fact situations presented to the courts there is a wrongful holding
of property and hence a threatened unjust enrichment of the
defendant." Constructive trusts are fictions of equity which are
bound by no unyielding formula when they are used by courts as
devices to remedy any situation in which the holder of legal title
may not in good conscience retain the beneficial interest.
In constructive trusts, the arrangement is temporary and passive in
which the trustees sole duty is to transfer the title and possession
over the property to the plaintiff-beneficiary. Of course, the
"wronged party seeking the aid of a court of equity in establishing a
constructive trust must himself do equity." Accordingly, the court
will exercise its discretion in deciding what acts are required of the
plaintiff-beneficiary as conditions precedent to obtaining such
decree and has the obligation to reimburse the trustee the
consideration received from the latter just as the plaintiff-
beneficiary would if he proceeded on the theory of rescission. In
the good judgment of the court, the trustee may also be paid the
necessary expenses he may have incurred in sustaining the
property, his fixed costs for improvements thereon, and the
monetary value of his services in managing the property to the
extent that plaintiff-beneficiary will secure a benefit from his acts.
The rights and obligations between the constructive trustee and
the beneficiary, in this case, respondent MCIAA and petitioners
over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil
Code, "When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what they
have received x x x In case of the loss, deterioration or
improvement of the thing, the provisions which, with respect to the
debtor, are laid down in the preceding article shall be applied to the
party who is bound to return x x x."23
On the matter of the repurchase price, while petitioners are obliged
to reconvey Lot No. 88 to respondents, the latter must return to the
former what they received as just compensation for the
expropriation of the property, plus legal interest to be computed
from default, which in this case runs from the time petitioners
comply with their obligation to respondents.
Respondents must likewise pay petitioners the necessary
expenses they may have incurred in maintaining Lot No. 88, as
well as the monetary value of their services in managing it to the
extent that respondents were benefited thereby.
Following Article 118724 of the Civil Code, petitioners may keep
whatever income or fruits they may have obtained from Lot No. 88,
and respondents need not account for the interests that the
amounts they received as just compensation may have earned in
the meantime.
In accordance with Article 119025 of the Civil Code vis--vis Article
1189, which provides that "(i)f a thing is improved by its nature, or
by time, the improvement shall inure to the benefit of the creditor x
x x," respondents, as creditors, do not have to pay, as part of the
process of restitution, the appreciation in value of Lot No. 88,
which is a natural consequence of nature and time.26
WHEREFORE, the petition is DENIED. The February 28, 2006
Decision of the Court of Appeals, affirming the October 22, 1999
Decision of the Regional Trial Court, Branch 87, Cebu City, and its
February 7, 2007 Resolution are AFFIRMED with MODIFICATION
as follows:
1. Respondents are ORDERED to return to petitioners
the just compensation they received for the expropriation
 of Lot No. 88, plus legal interest, in the case of default, to
be computed from the time petitioners comply with their
obligation to reconvey Lot No. 88 to them;
2. Respondents are ORDERED to pay petitioners the
necessary expenses the latter incurred in maintaining Lot
No. 88, plus the monetary value of their services to the
extent that respondents were benefited thereby;
3. Petitioners are ENTITLED to keep whatever fruits and
income they may have obtained from Lot No. 88; and
4. Respondents are also ENTITLED to keep whatever
interests the amounts they received as just
compensation may have earned in the meantime, as well
as the appreciation in value of Lot No. 88, which is a
natural consequence of nature and time;
In light of the foregoing modifications, the case is REMANDED to
the Regional Trial Court, Branch 57, Cebu City, only for the
purpose of receiving evidence on the amounts that respondents
will have to pay petitioners in accordance with this Courts
decision. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 130348 September 3, 2007
MIGUEL SORIANO, JR. and JULIETA SORIANO, petitioners,
vs.
ANTERO SORIANO and VIRGINIA SORIANO, respondents.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the Rules
of Court, as amended, petitioner spouses Miguel Soriano, Jr. and
Julieta Soriano seek: (1) the reversal of the 18 August
1997 Decision2 of the Court of Appeals, in CA-G.R. SP No. 44365;
(2) the dismissal of the complaint for ejectment filed by herein
respondents; and (3) the issuance of a temporary restraining order
enjoining the Metropolitan Trial Court (MeTC) and herein
respondents, and all persons acting in behalf of the latter, from
conducting proceedings relative to the writs of execution and
demolition issued in Civil Cases No. 3856 and No. 94-0001 until
final resolution of the present petition.
The assailed Court of Appeals decision affirmed in toto an earlier
Decision3 of the Regional Trial Court (RTC), Branch 255, Las
Pias, dated 3 April 1997, in two consolidated cases, Civil Cases
No. 96-0148 and No. 96-0148(A), affirming in toto the Joint
Decision4 of the MeTC, Branch 79, Las Pias, dated 15 April 1996,
in Civil Cases No. 3856 and No. 94-0001.
The case filed before the MeTC involved a Complaint5 for
Ejectment filed by respondents, spouses Antero Soriano and
Virginia Soriano, before the MeTC, Branch 79, Las Pias, on 24
February 1994. In said complaint, respondents prayed for the
following relief against petitioners, spouses Miguel Soriano, Jr. and
Julieta Soriano:
1] To vacate the premises covered by TCT NO. S33221
of the Register of Deeds of the Province of Rizal.
2] Ordering the defendants to pay the plaintiffs for the
use of the premises, from January 1994 up to the dates
defendants vacates (sic) the premises, the amount of
Two Thousand Six Hundred Sixty Two Pesos (P2,662.00)
per month plus 12% per annum with an increment of
10% every three (3) years beginning 1994.
3] Payment of attorney's fees in the amount of Ten
Thousand Pesos (P10,000.00) and Three Thousand
Pesos (P3,000.00) per appearance.6
Essentially, the facts are:
On 5 October 1981, respondents, spouses Antero Soriano and
Virginia Soriano, and petitioners, spouses Miguel Soriano, Jr. and
Julieta Soriano, as lessors and lessees respectively, entered into a
20-year period Contract of Lease7 over a 420 square meter parcel
of land8 situated at Pamplona, Las Pias, Metro Manila. The
leased property was intended as the site of a building still to be
constructed at that time, "to be used exclusively by the LESSEE in
that area."9
Part of the terms and conditions of said contract was a provision
against the sublease or assignment by the lessees of the subject
property to third persons absent the written consent of the
lessors, viz:
6. The LESSEE shall not sublease or assign the leased
area or any portion thereof, without first securing the
written consent of the LESSOR;
Alleging violation of the aforequoted condition, on 24 February
1994, respondents filed a complaint for ejectment against
petitioners before the MeTC, Branch 79, Las Pias, docketed as
Civil Case No. 3856. In the complaint, respondents averred that:
7] That sometime December 1993, the defendants (sic)
spouses were surprised to learn that the lessees, under
the guise of being the owner, were subleasing the same
to third persons.
8] That plaintiffs secured a copy of the "Contract of
Lease" entered into by the defendants and a certain
Marilou P. Del Castillo x x x.
9] That upon further investigation, the plaintiffs were
further surprised to learn that the premises were likewise
being leased to a Beauty Parlor, Photography Shop, Auto
Supply Dealer and a Money Changer.
10] That the subleasing of the premises was made by the
lessees sans the implied or express consent of the
Lessors.
xxxx
12] That on December 1993, plaintiffs sent to the
defendants a "Notice to Vacate" x x x.
13] That up to the present time, the defendants has (sic)
not yet vacated the premises.10
As proof of the above-quoted allegations, respondents offered in
evidence the following: 1) a copy of a contract11of lease executed
by and between Miguel Soriano, Jr. and Marilou P. Del Castillo on
3 July 1993; 2) the affidavit of Marilou P. Del Castillo essentially
corroborating the averments in the complaint respecting the
Contract of Lease between her and petitioners; 3) various
affidavits of third parties with whom petitioners allegedly subleased
various portions of the subject property; and 4) a Questioned
Document Report by the National Bureau of Investigation (NBI)
stating that the signature of Marilou P. Del Castillo on the Joint
Venture Agreement presented by respondents was a forgery.
On the other hand, petitioners denied violating the subject contract
of lease they signed with respondents and contradicted the
existence of the alleged sublease agreement with one Marilou P.
Del Castillo, as well as those with various other third persons.
Petitioners, instead, maintain that what existed between them and
the third parties, including Marilou P. Del Castillo, were joint
venture agreements; and that the Contract of Lease between
Marilou P. Del Castillo and petitioners was a falsified document
considering that the signatures of petitioner Julieta Soriano, the
witnesses and of the Notary Public were all claimed to be
forgeries. Petitioners then presented the supposed Joint Venture
Agreement12 entered into by and between them and Marilou P. Del
Castillo.
In the interregnum, before the complaint for ejectment could be
resolved by the MeTC, petitioners filed a petition for consignation
of rental fees for the period of January to June 1994 with the
MeTC. The claim for consignation, docketed as Civil Case No. 94-
0001, was grounded on the contention that respondents refused to
encash the checks paid to them for the rent of the subject property.
The MeTC consolidated the two civil actions, they being closely
related.
On 15 April 1996, the MeTC promulgated a Joint Decision on the
consolidated cases. The trial court found in favor of respondents.
The dispositive of the consolidated ruling reads:
WHEREFORE, judgment is rendered in favor of the
plaintiffs and against defendants ordering the latter and
all persons claiming rights under them to vacate the
premises in question and surrender possession thereof
to the former; to pay plaintiff the sum of P2,662.00 a
month from January, 1994 and monthly thereafter until
the subject premises is actually vacated; to pay
plaintiff P10,000.00 as reasonable attorney's fees and
cost of suit.
The consignation case is ordered dismissed together
with the counterclaim without pronouncement as to
costs.13
Based on the arguments and evidence presented by the parties,
the MeTC found that the contract that existed between petitioners
and Marilou P. Del Castillo was a sub-lease contract and not a joint
venture agreement. Much weight was given by said trial court on
the following documentary evidence: 1) affidavit of Marilou P. Del
Castillo stating that the contract she entered into with Julieta
Soriano was a sublease agreement, especially as said affidavit
was corroborated by the affidavits of two other witnesses; and 2)
the Questioned Document Report No. 843-1094 issued by the NBI
stating that the signature of Marilou P. Del Castillo on the Joint
Venture Agreementpresented by petitioners was a forgery. It
ratiocinated that:
It is this court (sic) considered view that the defendants
failed to overcome the presumption of validity of contract.
They having the one who put in issue the genuineness
and due execution of the sub contract of lease have the
burden of proof to prove otherwise. On the part of the
plaintiffs, they have proven at the very least, that the
Joint Venture Agreement has a semblance of forgery.
Defendant's negative assertion of facts cannot be given
more weight than that of plaintiffs' positive stand. What
the court has in mind in setting the clarificatory hearing is
to illicit from Marilou del Castillo which contract did she
enter into with Julieta Soriano, face to face with the
defendants and plaintiffs. This way the Court would be in
a position to observe the demeanor of all the parties
concern (sic) as well as the intended witness herself. It
was however unfortunate that it did not materialize.14
Anent the issue of consignation, the MeTC held that there was no
valid tender of payment, viz:
In the consignation case, it appears from the evidence of
defendants that it was sometime in the third week of
December, 1993 that they tendered to the plaintiffs
checks representing rentals from January to June, 1994.
Clearly, when the defendants tender payment as a
prerequisite of consignation, the rentals are not yet due.
Valid tender of payment therefore is wanting.15
On appeal to the RTC, the assailed joint decision was affirmed in
toto in a decision promulgated on 3 April 1997. In acknowledging
that the contract of lease between petitioners and respondents
was indeed violated, the RTC gave premium to the letter of one
Ma. Lourdes R. Acebedo, Executive Vice-President of Acebedo
Optical Co., Inc. dated 22 October 1993. According to the RTC, the
letter-proposal16 embodies the provisions of a lease agreement for
a period of one month as well as the conformity of petitioner Julieta
Soriano. The subject letter is hereunder quoted in full:
October 22, 1993
Ms. JULIET[A] B. SORIANO
House of Abraham Bldg.
281 Real Street, Pamplona
Las Pias, Metro Manila
Dear Ms. Soriano:
This is to formalize the discussion arranged by our
Messrs. Ernesto Victa and Ramil Mendoza for us to use
the front space of your establishment in connection with
our Project: Oplan Silip Mata from October 23 to
November 23, 1993. That upon your conforme of this
proposal letter we are to pay the amount of three
thousand five hundred (P3,500.00) pesos Philippine
Currency for the use of the space. Furthermore (sic) we
will pay you the sum of twenty (P20.00) pesos per day for
electric consumption.
We hope you will find the foregoing proposal acceptable
by signifying your conforme on the space provided below.
We thank you for your accommodation for this project.
Very truly yours,
ACEBEDO OPTICAL CO., INC.
By: (Sgd.)
MA. LOURDES R. ACEBEDO
Executive Vice-President
Conforme:
(Sgd.)
JULIET[A] B. SORIANO
For the court, the existence of the letter bolsters the claim of
respondents that portions of the subject property were indeed
subleased to third parties without their concurrence, in definite
violation of the provisions of the contract of lease.
On 7 April 1997, petitioners, through their counsel, the law firm
Rico & Associates, received their copy of the decision of the RTC.
On 17 April 1997, or ten days later, petitioners moved for the
reconsideration of the RTC decision.
On 6 May 1997, the RTC denied17 petitioners' motion for
reconsideration.
On 28 May 1997, petitioners received a copy of the aforesaid
denial. On the other hand, petitioners' counsel received a copy of
the same on 2 June 1997.
On 6 June 1997, from the adverse decision of the RTC, petitioners'
counsel went on to file a motion for extension of time to file petition
for review before the Court of Appeals. On 18 June 1997,
petitioners filed the petition for review docketed as CA-G.R. SP
No. 44365.
Meanwhile, on 20 June 1997, acting on respondents' Motion for
Execution of Judgment dated 7 April 1997, the RTC rendered an
Order,18 the full text of which is quoted hereunder:
It appears in the record that the defendants were served
with a copy of the decision of this Court on April 7, 1997.
The running of the period to appeal, however, was
interrupted when the defendants filed their motion for
reconsideration on April 17, 1997. So that from April 7,
1997 up to the filing of the motion for reconsideration on
April 17, 1997, ten (10) days have already been
consumed, and there are but five (5) days remaining
within which to perfect appeal or [file] petition for review.
The order dated May 6, 1997, denying defendant's (sic)
motion for reconsideration, was received by the
defendants, through their collaborating counsel, Atty.
Miguel Soriano, on May 28, 1997. So that if the
 defendants received the order on the said date, they
have but up to June 2, 1997 to interpose a petition. As no
appeal or petition for review was perfected up to this
date, as admitted by Atty. Soriano in open court on said
date (in the afternoon), then the decision of this Court
has already become final and executory.
WHEREFORE, and in view of the foregoing, the motion
for execution of judgment dated April 7, 1997, filed by the
plaintiffs, is hereby granted.
By authority of the ruling in Salientes vs. Intermediate
Appellate Court (246 SCRA 150) and other related cases
already decided, whereby execution of decisions in
ejectment cases falls within the jurisdiction of the inferior
court, and not the appellate court, let the record of this
case be remanded to the Metropolitan Trial Court,
Branch 79, Las Pias City, for execution of the judgment.
On 18 August 1997, the appellate court rendered a Decision
denying the petition, the dispositive portion of which states that:
WHEREFORE, foregoing considered, the petition for
review is hereby DENIED for lack of merit and the
appealed decision is hereby AFFIRMED in toto.
The Motion for Extension of Time to Reply filed by
petitioners and the ex-parte (sic) motion for deposit of
monthly rental are hereby DENIED for being moot and
academic.
The injunction granted is hereby permanently lifted.
Cost against petitioners.19
The Court of Appeals denied petitioners' recourse on two grounds:
1) for being filed out of time, that is:
Petitioners did not file their petition for review within the
reglementary period. Petitioners filed a motion for
extension to file Petition for Review. But this said motion
was filed only on June 6, 1997, when the 15-days
reglementary period has expired (citation omitted).20
and 2) for lack of merit considering that:
The existence of this contract of lease of petitioners with
Marilou del Castillo is in clear violation of the contract of
lease of petitioners and private respondents.21
The Issues
Hence, the present course of action, by which petitioners
fundamentally seek to reverse the ruling of the Court of Appeals on
the following grounds22:
I.
THE COURT OF APPEALS SERIOUSLY ERRED IN
HOLDING THAT THE PETITION WAS FILED OUT OF
TIME AS PETITIONERS WERE BOUND BY THE
SERVICE OF THE ORDER OF THE RTC DENYING
PETITIONERS' MOTION FOR RECONSIDERATION
UPON PETITIONER (ATTY. MIGUEL SORIANO), AND
NOT UPON THE UNDERSIGNED LAW FIRM WHICH
HAS FILED A FORMAL ENTRY OF APPEARANCE AS
COUNSEL FOR PETITIONERS IN THE
PROCEEDINGS A QUO;
II.
THE COURT OF APPEALS SERIOUSLY
MISAPPRECIATTED AND IMPROPERLY GAVE
CREDENCE TO THE "CONTRACT OF LEASE" DATED
3 JULY 1993 WHICH WAS INTRODUCED IN
EVIDENCE, BUT SIGNIFICANTLY ADMITTED TO BE A
FORGERY, BY PRIVATE RESPONDENTS; [and]
III.
THE COURT OF APPEALS TOTALLY IGNORED AND
COMPLETELY DISREGARDED THE CLEAR AND
CONVINCING EVIDENCE ON RECORD PROVING
BEYOND PERADVENTURE THAT PETITIONERS DID
NOT VIOLATE THEIR CONTRACT OF LEASE DATED 5
OCTOBER 1981 WITH PRIVATE RESPONDENTS, IN
THAT, WHAT WAS ACTUALLY ENTERED INTO
BETWEEN PETITIONERS AND MARILOU DEL
CASTILLO WAS A JOINT VENTURE AGREEMENT.
The Court's Ruling
A cursory reading of the petition promptly discloses that at the core
of the controversy are merely two issues. One involves a
procedural matter, that is, whether or not the petition filed before
the Court of Appeals was done in due time; and the other entails
an issue of substance anent the existence of a contract of
(sub)lease between petitioners and Marilou P. Del Castillo in
violation of the contract of lease between petitioners and
respondents.
Anent the first issue, the appellate court rationalized its finding that
the petition filed before it was filed beyond the reglementary period
within which to file a petition for review by stating thus:
Rico & Associates Law Office, counsel of petitioners,
claimed that it received the copy of the order denying the
motion for reconsideration only on June 2, 1997.
Records show however, that petitioner Atty. Miguel
Soriano received a copy of the order of denial on May 28,
1997. x x x.
xxxx
In this case, petitioner Atty. Miguel Soriano appeared as
counsel for petitioners.
xxxx
The five (5) days remaining period to appeal should
therefore be counted from May 28, 1997, when petitioner
Atty. Soriano received a copy of the Order of Denial and
not on June 2, 1997, when Rico & Associated Law Office
received its notice.23
Petitioners naturally dispute the foregoing findings. They counter
that the above is "clearly based on a deliberate misapprehension
of the true facts."24 Petitioners argue that as early as November
1995, before the MeTC, the law firm Rico & Associates Law Office
had already entered25 its appearance as their counsel of record;
that as stated therein, the address of said law firm is 4th Floor,
Cattleya Condominium, 235 Salcedo St., Legaspi Village, Makati
City; that petitioner Atty. Miguel Soriano "never filed a formal
appearance as counsel"26 for himself and his wife, Julieta Soriano,
"much less used his residence address (No. 79 Sterling Avenue,
Sterling Life Avenue, Pamplona, Las Pias, Metro Manila) as his
forwarding address for purposes of court notices"27; that, assuming
for the sake of argument, even if petitioner Atty. Miguel Soriano did
enter his provisional appearance as counsel for himself and his
wife by appearing in some court proceedings and signing
pleadings, still, he did so for Rico & Associates Law Office with
office address at Rm. 407 Cattleya Condominium, 235 Salcedo
St., Legaspi Village, Makati City; and that, "all court
notices, except the order of denial of petitioners' Motion for
Reconsideration, were never sent to petitioner Atty. Miguel Soriano
at his residence address."28 Thus, petitioners construe that, "it is
therefore highly anomalous why the RTC sent its Order dated 6
May 1997 to petitioner Atty. Miguel Soriano at his residence
address."29
Respondents insist, however, that the date of receipt of the RTC's
order denying petitioners motion for reconsideration should be
considered 28 May 1997, the date of receipt thereof by petitioner
Atty. Miguel Soriano, because the latter has entered his
appearance as collaborating counsel in the subject case and
signed several pleadings filed before the MeTC. Respondents
further contend that, "notice to him is effective notice to the
attorney of record";30 and, thus, petitioner Atty. Miguel Soriano
"cannot escape his own representations to serve his insidious
purposes."31
As to the procedural issue, we hold that the petition before the
Court of Appeals was timely filed.
In practice, service means the delivery or communication of a
pleading, notice or some other paper in a case, to the opposite
party so as to charge him with receipt of it and subject him to its
legal effect.32 The purpose of the rules on service is to make sure
that the party being served with the pleading, order or judgment is
duly informed of the same so that he can take steps to protect his
interests; i.e., enable a party to file an appeal or apply for other
appropriate reliefs before the decision becomes final.33 Pursuant to
Section 2, Rule 13 of the 1997 Rules of Civil Procedure, as
amended, service of court processes, inter alia, is made in the
following manner, to wit:
SEC. 2. Filing and service, defined. Filing is the act of
presenting the pleading or other paper to the clerk of
court.
Service is the act of providing a party with a copy of the
pleading or paper concerned. If any party has appeared
by counsel, service upon him shall be made upon his
counsel or one of them, unless service upon the party
himself is ordered by the court. Where one counsel
appears for several parties, he shall only be entitled to
one copy of any paper served upon him by the opposite
side.
As mentioned above, the general rule is, where a party appears by
attorney in an action or proceeding in a court of record, all notices
required to be given therein must be given to the attorney of
record; and service of the court's order upon any person other than
the counsel of record is not legally effective and binding upon the
party, nor may it start the corresponding reglementary period for
the subsequent procedural steps that may be taken by the
attorney.34 Notice should be made upon the counsel of record at
his exact given address,35 to which notice of all kinds emanating
from the court should be sent in the absence of a proper and
adequate notice to the court of a change of address.36
Said differently, when a party is represented by counsel of record,
service of orders and notices must be made upon said attorney;
and notice to the client and to any other lawyer, not the counsel of
record, is not notice in law.37
In the case at bar, the fact that petitioner Atty. Miguel Soriano, Jr.
may have appeared as counsel for himself and his wife in the
proceedings before the MeTC, or signed some pleadings filed
before the court, is of no moment. Firstly, despite the allegation of
respondents, nothing in the record shows that petitioner Atty.
Miguel Soriano, Jr. formally entered his appearance as
collaborating counsel for himself and co-petitioner Julieta Soriano.
Secondly, though some pleadings filed for petitioners bear the
signature of petitioner Atty. Miguel Soriano, Jr. as author thereof,
still, such pleadings equally display that the authorship was in
behalf of the law firm Rico & Associates Law Office and its address
4th Floor, Cattleya Condominium, 235 Salcedo St., Legaspi
Village, Makati City - as stated on record, the law firm which
appears to be the formal counsel of petitioners. Further, it does not
appear that there was any substitution of counsel, or that service
upon petitioner Atty. Miguel Soriano, Jr. had been specifically
ordered by the RTC. Interestingly, though, as professed by
petitioners, the order of denial of the motion for reconsideration of
the decision of the RTC was the only court process sent to
petitioner Atty. Miguel Soriano, Jr. This would show that it was
petitioners' counsel of record, Rico & Associates Law Office, that,
as a rule, received correspondence, notices and processes
respecting the subject case. Accordingly, the counsel of record of
petitioners, Rico & Associates Law Office, is presumed to be still
and the only one authorized to receive court processes, inter alia.
Notice of the denial of petitioners' motion for reconsideration of the
RTC's decision, served upon the Rico & Associates Law Office,
was the formal notice to petitioners. For all legal intents and
purposes, the service of that notice was the trigger that started the
running of the remaining five-day reglementary period within which
to file the petition to the appellate court or, at the very least, a
motion for extension of time to file said pleading.
Considering the prior disquisition, therefore, petitioners are
deemed to have received a copy of the subject denial by the RTC
of their motion for reconsideration on 2 June 1997 when their
counsel of record, Rico & Associates Law Office, received the
same. The remaining five-day period within which to file the
petition with the appellate court should have been counted from
that date. The last day, therefore, was 7 June 1997. Clearly, the
petition interposed before the Court of Appeals on 6 June 1997
was filed in due time. Otherwise, to consider the operative date of
receipt of the RTC Order denying petitioners' motion for
reconsideration to be 28 May 1997 -- when said order was
received by petitioner Atty. Miguel Soriano, Jr., who albeit
appeared as a collaborating counsel as well -- is to violate Section
2 of Rule 13 of the Rules of Court. As amended, that provision
states that when party is represented by counsel, service of
process must be made on counsel and not on the party.
Time and again, we have stressed that the rules of procedure are
used only to help secure and not override substantial justice.38 If a
stringent application of the rules would hinder rather than serve the
demands of substantial justice, the former must yield to the latter.39
Apropos the substantial issue involved in the case at bar,
petitioners contend that that the appellate court erred in holding
that they subleased a portion of the subject property to Marilou P.
Del Castillo in gross violation of the contract of lease executed
between petitioners and respondents. They argue that the finding
of the Court of Appeals that there exists a contract of (sub)lease
between petitioners and Marilou P. Del Castillo is founded on a
falsified contract of (sub)lease, as the signature of the witnesses
and notary public therein were forgeries; thus, the contract of
(sub)lease being a falsehood, the complaint of respondents is
groundless. Moreover, petitioners maintain that what really exists
between them and Marilou P. Del Castillo is a joint venture
agreement which in no way violates the provision concerning
subleasing.
Respondents argue against the above and stress that the
signatures were, indeed, falsified, and that it was petitioner Julieta
Soriano who was behind such deception.
In its assailed decision, the Court Appeals explained that:
The signatures of the witnesses and the notary public in
the contract of lease entered into by petitioners and
Marilou Del Castillo are indeed false. But by offering this
document with the false signatures of the witnesses and
notary public, it cannot be concluded that private
respondents resorted to falsehood.
As explained by private respondents, the document was
prepared by petitioners.
Marilou del Castillo also explained that when petitioners
delivered to her the contract of lease, the witnesses had
already signed the same and after signing, petitioner
Julieta Soriano signed the name of notary public Noberto
Malit, Sr. and sealed the document with the notarial seal
of Norberto Malit. Marilou del Castillo claimed that
petitioner Julieta Soriano signs (sic) for Norberto Malit
because the latter is a law partner of petitioner Atty.
Miguel Soriano.
We give credence to this testimony of Marilou del
Castillo. It is a common knowledge and practice that it is
the lessor who prepares the contract which would govern
the lease of the lessee. The lessee usually signs.
This is especially true in this case because petitioner
Atty. Miguel Soriano, the lessor is a lawyer who knows
the "know-hows" on the preparation of the contract of
lease.
Being the lessor of the leased premises (between
petitioners and Marilou del Castillo) and being a lawyer at
the same time, it would indeed be possible, basing it from
usual experience, that petitioners were the ones who
prepared their contract of lease with Marilou del Castillo.
As such, private respondents cannot be said to have
resorted to falsehood. Private respondents merely
offered as evidence the document prepared by
petitioners. The same could not be considered as fraud
in the presentation of their cause.40
Further, the appellate court elucidated that, though containing false
signatures, nevertheless, the state of affairs "will not warrant a
ruling that there was no valid contract of lease between petitioners
and Marilou Del Castillo,"41for the reason that said forgeries do "not
affect the existence of a valid contract. The law requires only the
consent of contracting parties x x x Consents (sic) of the witness or
that of the notary public are (sic) not needed for the perfection of
(a) contract."42
On the whole, the petition is devoid of merit.
At the outset, in imputing as error the appellate court's appreciation
of the genuineness of two supposed contracts executed by
petitioners and Marilou P. Del Castillo, i.e., the Contract of
(Sub)Lease vis--vis the Joint Venture Agreement, petitioners are
plainly bringing into play questions of fact and the appreciation of
evidence already made by no less than three courts of law below.
In a manner of speaking, petitioners would have us review once
again the factual determinations of the MeTC, as affirmed by not
one court, but two higher courts already the RTC and the Court
of Appeals. It has been consistently held that under Section 1,
Rule 45 of the Rules of Court, as amended, in an appeal to this
Court by way of a petition for review on certiorari, only questions of
law must be raised by the petitioner; 43 that is, our jurisdiction in a
petition for review on certiorari is limited to reviewing and
correcting only errors of law, not of fact, the only power of the
Court being to determine if the legal conclusions drawn from the
findings of fact are correct.44 The Court is not expected or required
to examine or refute the oral and documentary evidence submitted
by the parties.45
Of course, this Court may be minded to review the factual findings
of the Court of Appeals, but only in the presence of any of the
following circumstances: (1) the conclusion is grounded on
speculations, surmises or conjectures;46 (2) the interference is
manifestly mistaken, absurd or impossible;47 (3) there is grave
abuse of discretion;48 (4) the judgment is based on a
misapprehension of facts;49 (5) the findings of fact are
conflicting;50(6) there is no citation of specific evidence on which
the factual findings are based;51 (7) the findings of fact are
contradicted by the presence of evidence on record;52 (8) the
findings of the Court of Appeals are contrary to those of the trial
court;53 (9) the Court of Appeals manifestly overlooked certain
relevant and undisputed facts that, if properly considered, would
justify a different conclusion;54 (10) the findings of the Court of
Appeals are beyond the issues of the case;55 and (11) such
findings are contrary to the admissions of both parties. 56
Alas, we find none of the exceptions to be present in the case at
bar; therefore, we see no reason to depart from the general rule.
The findings of fact of the three courts are fully substantiated by
the evidence extant on record.
The foregoing discussion notwithstanding, we have reviewed the
records of the case at bar and find no reversible error committed
by the Court of Appeals concerning the merits of the present
petition. Without need to go into the fundamentals of the mendacity
surrounding the signature of the witnesses and the notary public
found on the subject contract of (sub)lease, the resolution of the
present controversy is uncomplicated. It boils down to the consent
of petitioner Julieta Soriano and Marilou P. Del Castillo as
evidenced by the legitimate signatures thereon. It has been proved
adequately to this Court that there exists a valid contract of
(sub)lease between petitioners and Marilou P. Del Castillo. The
concurrence of the fact that the latter acknowledges having signed
the contract along with petitioner Julieta Soriano, and of the fact
that the signatures of the witnesses and notary public are
forgeries, do not negate the presence of a valid contract of
(sub)lease. The signatures of the witnesses and the notary public
are considered necessary simply to make the contract binding on
third parties. It would have been a different matter had petitioners
alleged and offered evidence to show that the signatures of
petitioner Julieta Soriano and Marilou P. Del Castillo, parties to the
contract of (sub)lease, were forgeries as well which would mean
that parties to the assailed contract did not give their consent.
Absence of consent between the parties means that there was no
contract of (sub)lease; hence, petitioners would not be deemed to
have violated the prohibition on sublease, which was barred by the
contract of lease between them and respondents.
In fine, as correctly held by no less than three courts, there exists a
contract of (sub)lease between petitioners and a third party, which
is in clear violation of the prohibition contained in the contract of
lease entered into by petitioners and respondents.
WHEREFORE, premises considered, the instant petition is
DENIED. The assailed 18 August 1997 Decision of the Court of
Appeals in CA-G.R. SP No. 44365, is hereby AFFIRMED. Costs
against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 125485 September 13, 2004
RESTITUTA LEONARDO, assisted by JOSE T.
RAMOS, petitioners,
vs.
COURT OF APPEALS, and TEODORO SEBASTIAN, VICENTE
SEBASTIAN, CORAZON SEBASTIAN, assisted by ANDRES
MARCELO; PEDAD SEBASTIAN, HEIRS OF EDUVIGIS
SEBASTIAN, namely: EDUARDO S. TENORLAS, ABELARDO
J. TENORLAS, ADELA S. and SOLEDAD S. TENORLAS,
represented by EDUARDO S. TENORLAS, and HEIRS OF
DOMINADOR, namely: NAPOLEON SEBASTIAN, RUPERTO
SEBASTIAN, ADORACION SEBASTIAN, PRISCILLA
SEBASTIAN, LITA SEBASTIAN, TITA SEBASTIAN and GLORIA
SEBASTIAN, represented by NAPOLEON SEBASTIAN;
EVELYN SEBASTIAN; AURORA SEBASTIAN; and JULIETA
SEBASTIAN, respondents.
DECISION
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of Court
seeking to reverse and set aside the decision1 of the Court of
Appeals which in turn affirmed the judgment2 of Branch 57,
Regional Trial Court (RTC) of San Carlos City, dismissing for lack
of cause of action the complaint filed by petitioner against private
respondents for declaration of nullity of the extrajudicial settlement
of the estate of Jose Sebastian and Tomasina Paul.
Petitioner Restituta Leonardo is the only legitimate child of the late
spouses Tomasina Paul and Balbino Leonardo. Private
respondents Teodoro, Victor, Corazon, Piedad, as well as the late
Eduvigis and Dominador, all surnamed Sebastian, are the
illegitimate children of Tomasina with Jose Sebastian after she
separated from Balbino Leonardo.
In an action to declare the nullity of the extrajudicial settlement of
the estate of Tomasina Paul and Jose Sebastian before Branch 57,
RTC of San Carlos City, Pangasinan, petitioner alleged that, on
June 24, 1988, at around 5:00 p.m., private respondent Corazon
Sebastian and her niece Julieta Sebastian, and a certain Bitang,
came to petitioners house to persuade her to sign a deed of
extrajudicial partition of the estate of Tomasina Paul and Jose
Sebastian. Before signing the document, petitioner allegedly
insisted that they wait for her husband Jose Ramos so he could
translate the document which was written in English. Petitioner,
however, proceeded to sign the document even without her
husband and without reading the document, on the assurance of
private respondent Corazon Sebastian that petitioners share as a
legitimate daughter of Tomasina Paul was provided for in the
extrajudicial partition. Petitioner then asked private respondent
Corazon and her companions to wait for her husband so he could
read the document. When petitioners husband arrived, however,
private respondent Corazon and her companions had left without
leaving a copy of the document. It was only when petitioner hired a
lawyer that they were able to secure a copy and read the contents
thereof.
Petitioner refuted3 private respondents claim that they were the
legitimate children and sole heirs of Jose Sebastian and Tomasina
Paul. Despite the (de facto) separation of petitioners father
Balbino Leonardo and Tomasina Paul, the latter remained the
lawful wife of Balbino. Petitioner maintained that no joint settlement
of the estate of Jose Sebastian and Tomasina Paul could be
effected since what existed between them was co-ownership, not
conjugal partnership. They were never married to each other. The
extrajudicial partition was therefore unlawful and illegal.
Petitioner also claimed that her consent was vitiated because she
was deceived into signing the extrajudicial settlement. She further
denied having appeared before Judge Juan Austria of the
Municipal Trial Court (MTC) of Urbiztondo, Pangasinan on July 27,
1988 to acknowledge the execution of the extrajudicial partition.
Private respondents, in their answer with counterclaim,4 raised the
defense of lack of cause of action. They insisted that the document
in question was valid and binding between the parties. According
to them, on July 27, 1988, they personally appeared before Judge
Austria of the MTC of Urbiztondo, who read and explained the
contents of the document which all of them, including petitioner,
voluntarily signed.
Private respondents contended that their declaration that they
were legitimate children of Jose Sebastian and Tomasina Paul did
not affect the validity of the extrajudicial partition. Petitioners act of
signing the document estopped her to deny or question its validity.
They moreover averred that the action filed by petitioner was
incompatible with her complaint. Considering that petitioner
claimed vitiation of consent, the proper action was annulment and
not declaration of nullity of the instrument.
On July 27, 1989, petitioner filed an amended complaint5 to include
parties to the extrajudicial partition who were not named as
defendants in the original complaint.
During the August 23, 1990 pre-trial conference,6 no amicable
settlement was reached and the parties agreed that the only issue
to be resolved was whether petitioners consent to the extrajudicial
partition was voluntarily given.
In a decision dated February 22, 1993, the RTC of San Carlos City,
Pangasinan rendered a decision7 dismissing the complaint as well
as the counterclaim. The court a quo ruled that the element of
duress or fraud that vitiates consent was not established and that
the proper action was the reformation of the instrument, not the
declaration of nullity of the extrajudicial settlement of estate. By
way of obiter dictum, the trial court stated that, being a legitimate
child, petitioner was entitled to one-half (or 19,282.5 sq.m.) of
Tomasina Pauls estate as her legitime. The 7,671.75 square
meters allotted to her in the assailed extrajudicial partition was
therefore less than her correct share as provided by law.
On appeal, the Court of Appeals affirmed the judgment of the trial
court in its May 23, 1996 decision.8 Hence, this petition for review
on certiorari under Rule 45.
The sole issue in this case is whether the consent given by
petitioner to the extrajudicial settlement of estate was given
voluntarily.
We hold that it was not.
The essence of consent is the agreement of the parties on the
terms of the contract, the acceptance by one of the offer made by
the other. It is the concurrence of the minds of the parties on the
object and the cause which constitutes the contract. 9 The area of
agreement must extend to all points that the parties deem material
or there is no consent at all.10
To be valid, consent must meet the following requisites: (a) it
should be intelligent, or with an exact notion of the matter to which
it refers; (b) it should be free and (c) it should be spontaneous.
Intelligence in consent is vitiated by error; freedom by violence,
intimidation or undue influence; and spontaneity by fraud.11
In determining the effect of an alleged error, the courts must
consider both the objective and subjective aspects of the case
which is the intellectual capacity of the person who committed the
mistake.12
Mistake, on the other hand, in order to invalidate consent "should
refer to the substance of the thing which is the object of the
contract, or to those conditions which have principally moved one
or both parties to enter into the contract."13
According to the late civil law authority, Arturo M. Tolentino, the
(old) rule that a party is presumed to know the import of a
document to which he affixes his signature and is bound thereby,
has been altered by Art. 1332 of the Civil Code. The provision
states that "[w]hen one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former."
Article 1332 was a provision taken from american law,
necessitated by the fact that there continues to be a fair number of
people in this country without the benefit of a good education or
documents have been written in English or Spanish.14 The
provision was intended to protect a party to a contract
disadvantaged by illiteracy, ignorance, mental weakness or some
other handicap. It contemplates a situation wherein a contract is
entered into but the consent of one of the contracting parties is
vitiated by mistake or fraud committed by the other.15
Thus, in case one of the parties to a contract is unable to read and
fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former.16 Where
a party is unable to read, and he expressly pleads in his reply that
he signed the voucher in question "without knowing (its) contents
which have not been explained to him," this plea is tantamount to
one of mistake or fraud in the execution of the voucher or receipt in
question and the burden is shifted to the other party to show that
the former fully understood the contents of the document; and if he
fails to prove this, the presumption of mistake (if not fraud) stands
unrebutted and controlling.17
Contracts where consent is given by mistake or because of
violence, intimidation, undue influence or fraud are
voidable.18 These circumstances are defects of the will, the
existence of which impairs the freedom, intelligence, spontaneity
and voluntariness of the party in giving consent to the agreement.
In determining whether consent is vitiated by any of the
circumstances mentioned in Art. 1330 of the Civil Code, courts are
given a wide latitude in weighing the facts or circumstances in a
given case and in deciding in favor of what they believe actually
occurred, considering the age, physical infirmity, intelligence,
relationship and the conduct of the parties at the time of making
the contract and subsequent thereto, irrespective of whether the
contract is in a public or private writing.19
Although under Art. 1332 there exists a presumption of mistake or
error accorded by the law to those who have not had the benefit of
a good education, one who alleges any defect or the lack of a valid
consent to a contract must establish the same by full, clear and
convincing evidence, not merely by preponderance of
evidence.20Hence, even as the burden of proof shifts to the
defendants to rebut the presumption of mistake, the plaintiff who
alleges such mistake (or fraud) must show that his personal
circumstances warrant the application of Art. 1332.
In this case, the presumption of mistake or error on the part of
petitioner was not sufficiently rebutted by private respondents.
Private respondents failed to offer any evidence to prove that the
extrajudicial settlement of estate was explained in a language
known to the petitioner, i.e. the Pangasinan dialect. Clearly,
petitioner, who only finished Grade 3, was not in a position to give
her free, voluntary and spontaneous consent without having the
document, which was in English, explained to her in the
Pangasinan dialect. She stated in open court that she did not
understand English. Her testimony, translated into English, was as
follows:
Q : While you were there is your house at barangay
Angatel, Urbiztondo, Pangasinan, what happened?
A: On June 24, 1988, I was in our house because I got
sick, sir.
Q: What happened?
A: When the time was about 5:00 oclock, I was awaken
by my daughter-in-law, Rita Ramos, and told me that my
half sister Corazon would like to tell us something, sir.
Q: What did you do?
A: I let them come in, sir.
Q: Did they come in?
A: Yes, sir.
Q: Who was the companion of your half sister Corazon
Sebastian when she arrived in your house?
A: Julita Sebastian and her daughter Bitang, sir.
Q: And who is this Julita Sebastian to you?
A: She is my niece, sir.
Q: And then when they got inside the house, what
happened?
A: I asked them their purpose, sir.
Q: Did they tell you their purpose?
A: I asked their purpose in coming to our house and they
told me, "I came here because I have a partition
executed so that the share of each one of us will be
given", she said sir.
Q: Did you see that document?
A: Yes, sir.
ATTY. L. TULAGAN
Q: Did you read the document?
A: No, sir because I was waiting for my husband to have
that document read or translated to me because I could
not understand, sir.
Q: What could you not understand?
A: I can not understand English, sir.
Q: But anyway, can you read?
A: Yes, sir in Pangasinan.
Q: Now, that document which according to you was
brought by your half sister Corazon Sebastian, what
happened to that document?
A: Corazon Sebastian request(ed) me to sign, sir.
Q: Did you sign immediately?
A: Yes, sir, because according to her, all my shares were
embodied in that document as a legal daughter.21
Petitioners wish to wait for her husband, Jose T. Ramos, to
explain to her the contents of the document in the Pangasinan
dialect was a reasonable and prudent act that showed her
uncertainty over what was written. Due to her limited educational
attainment, she could not understand the document in English.
She wanted to seek assistance from her husband who was then
out of the house. However, due to the misrepresentation,
deception and undue pressure of her half-sister Corazon
Sebastian, petitioner signed the document. Corazon assured
petitioner that she would receive her legitimate share in the estate
of their late mother.
Later on, when petitioners husband examined the extrajudicial
partition agreement, he found out that petitioner was deprived of
her full legitime. Under the law, petitioners share should have
been one-half of her mothers estate, comprising a total area of
19,282.50 square meters. Under the defective extrajudicial
settlement of estate, however, petitioner was to receive only
7,671.75 square meters. This was a substantial mistake clearly
prejudicial to the substantive interests of petitioner in her mothers
estate. There is no doubt that, given her lack of education,
petitioner is protected by Art. 1332 of the Civil Code. There is
reason to believe that, had the provisions of the extrajudicial
agreement been explained to her in the Pangasinan dialect, she
would not have consented to the significant and unreasonable
diminution of her rights.
MTC Judge Austria, the officer who notarized the extrajudicial
settlement, stated that he explained the contents to all the parties
concerned. Granting arguendo, however, that Judge Austria did
indeed explain the provisions of the agreement to them, the
records do not reflect that he explained it to petitioner in a
language or dialect known to her. Judge Austria never stated in his
testimony before the court a quo what language or dialect he used
in explaining the contents of the document to the
parties.22 Significantly, he was not even certain if the parties to the
agreement were present during the notarization of the document:
ATTY. TULAGAN
Q. Reflected upon all the pages of this Exhibit "1" are
numerous signatures, two of whom belongs (sic) to
Piedad Paul Sebastian and Eduardo Sebastian Tenorlas.
ATTY. D. TULAGAN
(continuing)
The Philippines on July, 1989, will you please educate us
now Judge Austria on this document?
ATTY.O. DE GUZMAN
That will be improper, your Honor.
COURT
What is the question, you repeat the question.
INTERPRETER:
"Reflected upon all the pages of this Exhibit "1" are
numerous signatures, two of whom belongs (sic) to
Piedad Paul Sebastian and Eduardo Sebastian Tenorlas,
in your just concluded testimony, you said that everyone
of them appeared with you, we have here a documented
evidence coming from the Department of Justice, Bureau
of Immigration and Deportation, Manila, certifying that
Piedad Paul Sebastian and Eduardo Sebastian Tenorlas
did not arrive in the Philippines or departed from the
 Philippines on July, 1998, will you please educate us now
Judge Austria on this document?
ATTY. O. DE GUZMAN:
Your Honor please, before the witness answer, may we
examine the certification first and may we state for the
record that the month of July, 1998 does not specify any
date.
ATTY.. L. TULAGAN:
July.
ATTY. O. DE GUZMAN:
But not a particular date, for the record.
ATTY. L. TUL.AGAN:
For the whole month of July, no departure and no arrival.
This is a certificate from the Bureau of Immigration,
Manila. I do not know about this, as a matter of fact, I do
not even know this person personally
WITNESS:
Somebody that kind of name appeared before me.
ATTY. L. TULAGAN:
Q: Since you do not know everybody from Urbiztondo,
Pangasinan it is possible that another person appeared
and signed for that name?
A: Yes, possible.23
Therefore, the presumption of mistake under Article 1332 is
controlling, having remained unrebutted by private respondents.
The evidence proving that the document was not fully explained to
petitioner in a language known to her, given her low educational
attainment, remained uncontradicted by private respondents. We
find that, in the light of the circumstances presented by the
testimonies of the witnesses for both parties, the consent of
petitioner was invalidated by a substantial mistake or error,
rendering the agreement voidable. The extrajudicial partition
between private respondents and petitioner should therefore be
annulled and set aside on the ground of mistake.
In Rural Bank of Caloocan, Inc. v. Court of Appeals,24 we ruled that
a contract may be annulled on the ground of vitiated consent, even
if the act complained of is committed by a third party without the
connivance or complicity of one of the contracting parties. We
found that a substantial mistake arose from the employment of
fraud or misrepresentation. The plaintiff in that case was a 70-year-
old unschooled and unlettered woman who signed an
unauthorized loan obtained by a third party on her behalf. The
Court annulled the contract due to a substantial mistake which
invalidated her consent.
By the same reasoning, if it is one of the contracting parties who
commits the fraud or misrepresentation, such contract may all the
more be annulled due to substantial mistake.
In Remalante v. Tibe,25 this Court ruled that misrepresentation to
an illiterate woman who did not know how to read and write, nor
understand English, is fraudulent. Thus, the deed of sale was
considered vitiated with substantial error and fraud. This Court
further held:26
Since it has been established by uncontradicted
evidence that the plaintiff is practically unschooled and
illiterate, not knowing how to read, write and understand
the English language in which Exhibit 22 was drafted, it
would have been incumbent upon the defendant to show
that the terms there of have been fully explained to the
plaintiff. The evidence is entirely lacking at this point, and
the lack of it is fatal to the cause of the defendant for his
failure to discharge the burden of proof.
Generally, the remedy of appeal by certiorari under Rule 45 of the
Rules of Court contemplates only questions of law and not issues
of fact.27 This rule, however, is inapplicable in cases such as the
one at bar where the factual findings complained of are absolutely
devoid of support in the records or the assailed judgment of the
appellate court is based on a misapprehension of facts.28 Thus,
this case is an exception to the general rule on the conclusiveness
of facts, the evidence pointing to no other conclusion but the
existence of vitiated consent, given the diminished intellectual
capacity of the petitioner and the misrepresentation of private
respondent Corazon Sebastian on the contents of the extrajudicial
partition.
Private respondents also maintain that petitioner has no cause of
action since the remedy that should be pursued is an action for
annulment and not for declaration of nullity. Private respondents
therefore pray for the dismissal of this petition on the ground of
lack of cause of action.
Before ruling on this procedural matter, a distinction between an
action for annulment and one for declaration of nullity of an
agreement is called for.1avvphil.net
An action for annulment of contract is one filed where consent is
vitiated by lack of legal capacity of one of the contracting parties,
or by mistake, violence, intimidation, undue influence or fraud. 29 By
its very nature, annulment contemplates a contract which
is voidable, that is, valid until annulled. Such contract is binding on
all the contracting parties until annulled and set aside by a court of
law. It may be ratified. An action for annulment of contract has a
four-year prescriptive period.30
On the other hand, an action for declaration of nullity of contract
presupposes a void contract or one where all of the requisites
prescribed by law for contracts are present but the cause, object or
purpose is contrary to law, morals, good customs, public order or
public policy, prohibited by law or declared by law to be
void.31 Such contract as a rule produces no legal and binding effect
even if it is not set aside by direct legal action. Neither may it be
ratified. An action for the declaration of nullity of contract is
imprescriptible.32
The petitioners pleading was for the declaration of nullity of the
extrajudicial settlement of estate. However, this did not necessarily
mean the automatic dismissal of the case on the ground of lack of
cause of action.
Granting that the action filed by petitioner was incompatible with
her allegations, it is not the caption of the pleading but the
allegations that determine the nature of the action.33 The court
should grant the relief warranted by the allegations and the proof
even if no such relief is prayed for.34 In this case, the allegations in
the pleading and the evidence adduced point to no other remedy
but to annul the extrajudicial settlement of estate because of
vitiated consent.
WHEREFORE, the decision of the Court of Appeals dated 23 May
1996 is hereby REVERSED. The extrajudicial settlement of the
estate of Tomasina Paul and Jose Sebastian is
hereby ANNULLED and SET ASIDE. No cost.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 145017 January 28, 2005
DR. JOSE and AIDA YASON, petitioners,
vs.
FAUSTINO ARCIAGA, FELIPE NERI ARCIAGA, DOMINGO
ARCIAGA, and ROGELIO ARCIAGA, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, assailing the
Amended Decision1 of the Court of Appeals dated September 13,
2000 in CA G.R. CV No. 55668, entitled "Faustino Arciaga, et. al.
vs. Dr. Jose Yason and Aida Yason."
The factual antecedents as borne by the records are:
Spouses Emilio and Claudia Arciaga were owners of Lot No. 303-B
situated in Barangay Putatan, Muntinlupa City, with an area of
5,274 square meters covered by TCT No. 40913 of the Registry of
Deeds of Makati City. On March 28, 1983, they executed a Deed of
Conditional Sale whereby they sold Lot No. 303-B for P265,000.00
to spouses Dr. Jose and Aida Yason, petitioners. They tendered an
initial payment of P150,000.00. On April 19, 1983, upon payment
of the balance of P115,000.00, spouses Emilio and Claudia
Arciaga executed a Deed of Absolute Sale. That day, Claudia died.
She was survived by her spouse and their six (6) children, namely:
Faustino, Felipe Neri, Domingo, Rogelio, Virginia, and Juanita.
Petitioners had the Deed of Absolute Sale registered in the
Registry of Deeds of Makati City. They entrusted its registration to
one Jesus Medina to whom they delivered the document of sale
and the amount of P15,000.00 as payment for the capital gains
tax. Without their knowledge, Medina falsified the Deed of Absolute
Sale and had the document registered in the Registry of Deeds of
Makati City. He made it appear that the sale took place on July 2,
1979, instead of April 19, 1983, and that the price of the lot was
only P25,000.00, instead of P265,000.00. On the basis of the
fabricated deed, TCT No. 40913 in the names of spouses Arciaga
was cancelled and in lieu thereof, TCT No. 120869 was issued in
the names of petitioners.
Subsequently, petitioners had Lot No. 303-B subdivided into 23
smaller lots. Thus, TCT No. 120869 was cancelled and in lieu
thereof, TCT Nos. 132942 to 132964 were issued. Petitioners then
sold several lots to third persons, except the 13 lots covered by
TCT Nos. 132942, 132943, 132945, 132946, 132948, 132950,
132951, 132953, 132954, 132955, 132958, 132962 and 132963,
which they retained.
Sometime in April 1989, spouses Arciagas children learned of the
falsified document of sale. Four of them, namely: Faustino, Felipe
Neri, Domingo and Rogelio, herein respondents, caused the filing
with the Office of the Provincial Prosecutor of Makati City a
complaint for falsification of documents against petitioners,
docketed as I.S No. 89-1966. It was only after receiving the
subpoena in April 1989 when they learned that the Deed of
Absolute Sale was falsified. However, after the preliminary
investigation, the Provincial Prosecutor dismissed the complaint for
falsification for lack of probable cause.
Undaunted, respondents, on October 12, 1989, filed with the
Regional Trial Court (RTC), Branch 62, Makati City, a complaint for
annulment of the 13 land titles, mentioned earlier, against
petitioners. Respondents alleged inter alia that the Deed of
Absolute Sale is void ab initio considering that (1) Claudia Arciaga
did not give her consent to the sale as she was then seriously ill,
weak, and unable to talk and (2) Jesus Medina falsified the Deed
of Absolute Sale; that without Claudias consent, the contract is
void; and that the 13 land titles are also void because a forged
deed conveys no title.
In their answer, petitioners specifically denied the allegations in the
complaint and averred that they validly acquired the property by
virtue of the notarized Deed of Conditional Sale and the Deed of
Absolute Sale executed by spouses Emilio and Claudia Arciaga,
respondents parents. The Deed of Absolute Sale was duly signed
by the parties in the morning of April 19, 1983 when Claudia was
still alive. It was in the evening of the same day when she died.
Hence, the contract of sale is valid. Furthermore, they have no
participation in the falsification of the Deed of Absolute Sale by
Medina. In fact, they exerted efforts to locate him but to no avail.
On August 29, 1995, the trial court rendered a Decision dismissing
respondents complaint and sustaining the validity of the Deed of
Conditional Sale and the Deed of Absolute Sale. The dispositive
portion reads:
"WHEREFORE, Premises Considered, the COMPLAINT is hereby
ordered DISMISSED, without pronouncement as to costs.
SO ORDERED."
In their appeal to the Court of Appeals, respondents alleged that
the trial court clearly overlooked vital and significant facts which, if
considered, would alter the result. Likewise, the trial court erred in
concluding that the Deed of Absolute Sale forged by Medina
transferred ownership to the vendees, being buyers in good faith;
and in finding that Claudia Arciaga consented to the sale of the lots
to petitioner spouses.2
Initially, the Court of Appeals in its Decision dated February 21,
2000 affirmed the trial courts ruling. But upon respondents motion
for reconsideration, the Appellate Court reconsidered its Decision.
In its Amended Decision, it declared the Deed of Absolute Sale
void, thus:
"WHEREFORE, Our decision dated February 21, 2000 is hereby
SET ASIDE. The Deed of Absolute Sale dated April 19, 1983 is
hereby declared null and void. The Registry of Deeds for Makati
City is hereby ordered to cancel TCT Nos. 132942, 132943,
132945, 132946, 132948, 132950, 132951, 132953, 132954,
132955, 132958, 132962 and 132963 issued in the name of Jose
Yason and to reinstate TCT No. 40913 in the name of Emilio
Arciaga.
SO ORDERED."
In reversing its own Decision, the Appellate Court held:
"There is no evidence showing that said July 2, 1979 Deed of
Absolute Sale covering the subject property was ever executed by
the parties. The appellees themselves who were supposedly the
vendees did not even know of the existence of such sale. What the
appellees were claiming was that they entrusted to one Jesus
Medina the original copies of the purported Deed of Absolute Sale
dated April 19, 1983 and the owners copy of TCT No. 40913
together with the amount of P15,000.00 for capital gains tax and
expenses for registration.
xxx
It turned out that Medina did not use the Deed of Sale dated April
19, 1983 but fabricated a Deed of Absolute Sale dated July 2,
1979 with a reduced consideration of P25,000.00.
xxx
Being a forged document, the July 2, 1979 Deed of Absolute Sale
is indeed null and void.
It appears, however, that a Deed of Conditional Sale dated March
28, 1983 (Exh. 1, Record, p. 289) and a Deed of Absolute Sale
dated April 19, 1983 (Exh. 2, Record, p. 290) were purportedly
executed by Emilio Arciaga and the appellees and that the said
property was allegedly sold for P265,000.00.
xxx
The curious part about the controversial deeds is the date of their
supposed execution, especially the date of the Absolute Deed of
Sale which coincides with the date of the death of Claudia Arciaga.
Also intriguing is the fact that only a thumbmark and not a
signature of Claudia Arciaga was affixed on the supposed deeds,
when in fact she could definitely read and write.
Appellants claimed that their mother Claudia Rivera never gave
her consent to the sale. They said that the thumbmark of their
mother Claudia Arciaga was allegedly fixed on the Deed of
Conditional Sale, if indeed it was prepared before the death of their
mother on April 19, 1983, when she was already very ill and
bedridden and could not anymore give her consent thereto, and
the Deed of Absolute Sale was thumbmarked when she was
already dead.
xxx
As between the testimony of the appellants and their sister Virginia
Arciaga-Reyes, We are inclined to believe the claim of the former
that their mother Claudia Rivera Arciaga died at around 10:00 in
the morning.
xxx
The time when Claudia Rivera Arciaga actually died, to Us, is
crucial if only to determine the credibility of witnesses.
As between Virginia Arciaga Reyes and Jacklyn de Mesa, the
latter is more credible.l^vvphi1.net She did not have any interest in
the controverted property, unlike the appellants and Virginia
Reyes, who are the children of Claudia Rivera Arciaga. The
cardinal rule in the law of evidence is that the testimony must not
only proceed from the mouth of a credible witness but must also
be credible in itself (People vs. Serdan, G.R. 87318, September 2,
1992).
xxx
We certainly cannot believe the testimony of Virginia Arciaga
Reyes that her mother Claudia went to the house of Atty. Fresnedi
for the execution of the Deed of Conditional Sale. A person who is
physically fit to travel can definitely write his signature, as only
minimal effort is needed to perform this simple mechanical act. But
what appeared in the deed was only a purported thumb mark of
Claudia. Even Virginia Reyes said that her mother could write. Her
testimony only supports the claim of the appellants that Claudia
Rivera Arciaga was already very ill and weak when the Deed of
Conditional Sale was purportedly executed, and was already dead
when she was made to affix her thumb mark on the Deed of
Absolute Sale.
xxx
In sum, the inconsistent testimonies of the appellee and his
witnesses, particularly that of Virginia Arciaga Reyes, clearly show
that Claudia Rivera Arciaga did not voluntarily affix her thumb mark
on the Deed of Conditional Sale and Deed of Absolute Sale."
Hence, this petition for review on certiorari alleging that the Court
of Appeals erred in declaring the Deed of Absolute Sale void for
lack of consent on the part of Claudia Arciaga and because the
same document was forged by Medina.
The petition is impressed with merit.
The rule is that only questions of law may be raised in a petition for
review on certiorari; and that the factual findings of the trial court,
when adopted and confirmed by the Court of Appeals, are final and
conclusive on this Court.3 However, there are exceptions, such as
when the findings of the Court of Appeals are contrary to those of
the trial court,4 as in this case.
In determining whether the Deed of Absolute Sale dated April 19,
1983 is valid, it must contain the essential requisites of
contracts, viz: (1) consent of the contracting parties; (2) object
certain which is the subject matter of the contract; and (3) cause of
the obligation which is established.5 A contract of sale is perfected
at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price.6 Consent is
manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the
contract.7 To enter into a valid legal agreement, the parties must
have the capacity to do so.
The law presumes that every person is fully competent to enter
into a contract until satisfactory proof to the contrary is presented.
The burden of proof is on the individual asserting a lack of capacity
to contract, and this burden has been characterized as requiring
for its satisfaction clear and convincing evidence.
The Appellate Court, in its Amended Decision, held that the Deed
of Absolute Sale is void for lack of consent on the part of Claudia
Arciaga who could not have affixed her thumbmark thereon since
she was very ill then. In fact, she died a few hours thereafter.
Thus, the basic issue for our resolution is whether Claudia Arciaga
voluntarily affixed her thumbmark on the documents of sale.
Respondents contend that Claudia did not give her consent to the
contracts of sale. Since she knew how to read and write, she
should have signed each document instead of merely affixing her
thumbmark thereon.
Domingo Arciaga, one of the respondents, testified that her mother
Claudia was 82 years old when she died on April 19, 1983 due to
"old age" and illness for four (4) months. On March 28, 1983, when
the Conditional Deed of Sale was allegedly executed, she was
already very weak and thin and could no longer speak.
Considering her physical condition, she could not have affixed her
thumbmark on the Conditional Deed of Sale that day.8
Domingo further testified that their mother Claudia, at the time of
her death, was being attended to by his sisters Juanita and
Virginia Arciaga; that he saw Virginia holding the thumb of their
mother to enable her to affix her thumbmark on the Deed of
Absolute Sale, then being held by Juanita, thus:
"Q: Now, you have examined the document entitled Deed
of Sale dated April 19, 1983, when for the first time did
you see this document?
A: When my mother died.
Q: When?
A: April 19, 1983.
Q: At what particular occasion or will you please tell the
Honorable Court the circumstances how you were able to
see this document on April 19, 1983?
A: This is like this. While my mother was being attended,
I went over to the porch and I saw Mr. Rogelio Arciaga.
 We talked with each other. After that I went inside the
house wherein I saw Juliana Arciaga holding that
document, the Deed of Sale, and Virginia Arciaga was
holding the thumb of mother affixing said thumb to the
document.
Q: Who is Virginia Arciaga?
A: My sister.
Q: How about Juanita Arciaga?
A: My sister also.
Q: How about Rogelio Arciaga?
A: I have also a brother named Rogelio Arciaga but the
one I mentioned has the same name as my brother.
Q: After that what happened?
A: I asked, what is that? And they told me that one parcel
of land was sold already by us and they said that this is
the Deed of Absolute Sale as proof that we have sold
that parcel of land. I asked them: Why did you do that? It
cannot be! Our mother is a good mother, why still permit
her to commit a sin.
Q: After that what happened next?
A: They told me that they are not going to pursue with it
and I told them it cannot be really done."9
Domingos testimony was corroborated by his brother Felipe
Arciaga who testified that their mother was already dead when her
thumbmark was affixed on the document of sale, thus:
"Q: Did you hear any conversation between Domingo
and your sisters holding the document?
A: Yes, sir.
Q: What was the conversation that you heard?
A: My brother said that it should not be thumbmarked
since my mother is already dead. My sisters Virginia and
Juanita replied that the thumb marking will no longer
proceed."10
Upon the other hand, petitioners maintain that Claudia
voluntarily affixed her thumbmark on the Deeds of
Conditional and Absolute Sale which were notarized by
Atty. Jaime Fresnedi. and Absolute Sale which were
notarized by Atty. Jaime Fresnedi. Virginia Arciaga
Andres, daughter of Claudia, testified that she took care
of her mother. Five (5) months prior to the execution of
the Conditional Deed of Sale on March 28, 1983, her
parents informed her and her siblings that they would sell
their land. After the sale, her brother Felipe Neri
borrowed P50,000.00 from their father. Her father signed
the two documents of sale, while her mother affixed her
thumbmark thereon. Then Atty. Jaime Fresnedi notarized
the Conditional Deed of Sale in his office, while the Deed
of Absolute Sale was notarized in her house. Her
brothers (respondents herein) were all notified of the
sale.111awphi1.nt
Atty. Jaime Fresnedi testified that he notarized the
subject documents and knew that Claudia affixed her
thumbmark thereon, thus:
"Q: What is the importance of the signatures in these two
(2) documents?
A: That the parties who executed these documents
appeared before me, your Honor.
xxx
Q: And when did you notarize the said document, this
Deed of Absolute Sale dated April 19, 1983?
A: It was notarized in the same date.
Q: Where was it notarized?
A: It was also notarized in my office.
A: Yes, sir.12
xxx
Q: Do you know personally Claudia Arciaga, the wife of
Emilio Arciaga?
A: No, I do not know her personally.
xxx
Q: Prior to the execution of this document, Absolute
Deed of Sale dated April 19, 1983, have you not met
Claudia Rivera?
A: I cannot remember.
xxx
Q: When you notarized this document on April 19, 1983,
did you talk to Claudia Rivera?
A: I cannot remember.13
xxx
COURT:
Q: Did you ascertain whether the person who affixed that
thumbmark was really CLAUDIA ARCIAGA?
A: Yes, your Honor.
Q: What means did you take to ascertain that the one
who affixed that thumbmark was CLAUDIA ARCIAGA?
A: Because, your Honor, when there is a party, not
necessarily your Honor in this case, whenever a party
would request me to prepare a document and notarize
such document, I asked his name and he answered. Let
us say for example, this Mr. dela Cruz, he says he is Mr.
dela Cruz or Mrs. Arciaga. That thru that introduction I
knew that they were the ones who affixed their
signatures or affix their thumbmarks.
Q: In this particular case, did you do that?
A: Yes, your Honor."14
The Court of Appeals, reversing the trial court, held that
respondents were able to prove that Claudia Arciaga could not
have affixed her thumbmark voluntarily on the Conditional Deed of
Sale as "she was already very ill and bedridden and could not
anymore give her consent thereto;" and that "the Absolute Deed of
Sale was thumbmarked when she was already dead."
While it is true that Claudia was sick and bedridden, respondents
failed to prove that she could no longer understand the terms of
the contract and that she did not affix her thumbmark thereon.
Unfortunately, they did not present the doctor or the nurse who
attended to her to confirm that indeed she was mentally and
physically incapable of entering into a contract. Mere weakness of
mind alone, without imposition of fraud, is not a ground for
vacating a contract.15 Only if there is unfairness in the transaction,
such as gross inadequacy of consideration, the low degree of
intellectual capacity of the party, may be taken into consideration
for the purpose of showing such fraud as will afford a ground for
annulling a contract.16 Hence, a person is not incapacitated to
enter into a contract merely because of advanced years or by
reason of physical infirmities, unless such age and infirmities
impair his mental faculties to the extent that he is unable to
properly, intelligently and fairly understand the provisions of said
contract. Respondents failed to show that Claudia was deprived of
reason or that her condition hindered her from freely exercising her
own will at the time of the execution of the Deed of Conditional
Sale.
Also, it is of no moment that Claudia merely affixed her thumbmark
on the document. The signature may be made by a persons cross
or mark even though he is able to read and write and is valid if the
deed is in all other respects a valid one.17
Significantly, there is no evidence showing that Claudia was forced
or coerced in affixing her thumbmark on the Deed of Conditional
Sale.
Respondents insist that their mother died in the morning of April
19, 1983, hence, she could no longer affix her thumbmark on the
Deed of Absolute Sale. Petitioners, however, maintain that she
died in the evening of that day and that she affixed her thumbmark
on the deed in the morning of that same day.
Respondents should have offered in evidence the Certificate of
Death of Claudia to show the exact date and time of her death.
Again, they should have presented the attending physician to
testify whether or not Claudia could still affix her thumbmark then.
As earlier mentioned, the burden is on the respondents to prove
the lack of capacity on the part of Claudia to enter into a contract.
And in proving this, they must offer clear and convincing evidence.
This they failed to do.
The Court of Appeals also held that there is inconsistency in the
testimonies of Virginia Arciaga and Atty. Jaime Fresnedi. While
Virginia testified that the Deed of Absolute Sale was notarized in
her house where Claudia lived, Atty. Fresnedi declared on the
witness stand that he notarized the document in his office. The
Appellate Court concluded that such inconsistency clearly shows
that Claudia did not voluntarily affix her thumbmark on the
document of absolute sale.
Records disclose, however, that when Atty. Fresnedi testified in
court, nine (9) years had passed from the time he notarized the
Deed of Absolute Sale. Considering the length of time that passed
and the numerous documents he must have notarized, his failure
to remember exactly where he notarized the contract of sale is
understandable. Thus, we cannot sustain the finding and
conclusion of the Court of Appeals on this point.l^vvphi1.net
In Chilianchin vs. Coquinco,18 this Court held that a notarial
document must be sustained in full force and effect so long as he
who impugns it does not present strong, complete, and conclusive
proof of its falsity or nullity on account of some flaws or defects
provided by law. Here, respondents failed to present such proof.
It bears emphasis that a notarized Deed of Absolute Sale has in its
favor the presumption of regularity, and it carries the evidentiary
weight conferred upon it with respect to its execution.19
All told, we are convinced and so hold that there was consent on
the part of Claudia Arciaga when she executed the Conditional
Deed of Sale and the Deed of Absolute Sale being assailed by
respondents. These documents, therefore, are valid.
WHEREFORE, the challenged Decision of the Court of Appeals in
CA-G.R. CV No. 55668 is REVERSED. The Decision of the RTC,
Branch 62, Makati City dismissing respondents complaint is
AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 155810 August 13, 2004
LYDIA SUMIPAT, LAURITO SUMIPAT, ALEJANDRO SUMIPAT,
ALICIA SUMIPAT, and LIRAFE SUMIPAT,petitioners,
vs.
BRIGIDO BANGA, HERMINIGILDO TABOTABO, VIVIANO
TABOTABO, BERNARDITA ANION, and LEONIDA
TABOTABO, respondents.
DECISION
TINGA, J.:
This is a Petition for Review on Certiorari1 of the Decision2 of the
Court of Appeals which reversed and set aside the decision 3 of the
Regional Trial Court (RTC) and partially annulled the Deed of
Absolute Transfer and/or Quitclaim (the deed) subject of this case.
We quote the appellate courts findings of fact:
The spouses Placida Tabo-tabo and Lauro Sumipat, who
contracted marriage on July 20, 1939, acquired three
parcels of land two of which were covered by Original
Certificate of Title No. P-17842 and Transfer Certificate of
Title No. T-15826.
The couple was childless.
Lauro Sumipat, however, sired five illegitimate children
out of an extra-marital affair with Pedra Dacola, namely:
herein defendants-appellees Lydia, Laurito, Alicia,
Alejandro and Lirafe, all surnamed Sumipat.
On January 5, 1983, Lauro Sumipat executed a
document denominated "DEED OF ABSOLUTE
TRANSFER AND/OR QUIT-CLAIM OVER REAL
PROPERTIES" (the assailed document) in favor of
defendants-appellees covering the three parcels of land
(the properties). On the document appears the signature
of his wife Placida which indicates that she gave her
marital consent thereto.
It appears that on January 5, 1983 when the assailed
document was executed, Lauro Sumipat was already
very sick and bedridden; that upon defendant-appellee
Lydias request, their neighbor Benjamin Rivera lifted the
body of Lauro Sumipat whereupon Lydia guided his
 (Lauro Sumipats) hand in affixing his signature on the
assailed document which she had brought; that Lydia
thereafter left but later returned on the same day and
requested Lauros unlettered wife Placida to sign on the
assailed document, as she did in haste, even without the
latter getting a responsive answer to her query on what it
was all about.
After Lauro Sumipats death on January 30, 1984, his
wife Placida, hereinafter referred to as plaintiff-appellant,
and defendants-appellees jointly administered the
properties 50% of the produce of which went to plaintiff-
appellant.
As plaintiff-appellants share in the produce of the
properties dwindled until she no longer received any and
learning that the titles to the properties in question were
already transferred/made in favor of the defendants-
appellees, she filed a complaint for declaration of nullity
of titles, contracts, partition, recovery of ownership now
the subject of the present appeal.
Defendant-appellee Lydia disclaims participation in the
execution of the assailed document, she claiming to have
acquired knowledge of its existence only on January 10,
1983 or five days after its execution when Lauro Sumipat
gave the same to her.
Branch 6 of the Regional Trial Court of Dipolog City
decided the case in favor of defendants-appellees, it
holding that by virtue of the assailed document the due
execution of which was not contested by plaintiff-
appellant, the properties were absolutely transferred to
defendants-appellees.4
The trial court found that the subject properties are conjugal having
been acquired during the marriage of Lauro Sumipat and Placida
Tabotabo (Placida). However, because Placida failed to question
the genuineness and due execution of the deed and even admitted
having affixed her signature thereon, the trial court declared that
the entirety of the subject properties, and not just Lauro Sumipats
conjugal share, were validly transferred to the defendants, the
petitioners herein.5
On appeal,6 the appellate court held that since Placida was
unlettered,7 the appellees, the petitioners herein, as the parties
interested in enforcing the deed, have the burden of proving that
the terms thereof were fully explained to her.8 This they failed to
do.
Under the Civil Code, a contract where consent is given through
mistake, violence, intimidation, undue influence or fraud is
voidable.9 In order that mistake may invalidate consent, it should
refer to the substance of the thing which is the object of the
contract, or to those conditions which have principally moved one
or both parties to enter into the contract.10
The appellate court found that Placida did not understand the full
import of the deed because the terms thereof were not explained
to her either by the petitioners or by the notary public before whom
the deed was acknowledged. According to the appellate court,
Judge Pacifico Garcia (Judge Garcia), before whom the deed was
acknowledged, did not identify Placida as having appeared before
him on January 5, 1983 to acknowledge the deed.
The jurat indicates that it was only Lauro Sumipat who appeared
before Judge Garcia and to whom he explained the contents of the
deed. Further, the appellate court noted that Judge Garcia himself
was under the impression that the deed conveyed the exclusive
properties of Lauro Sumipat. Hence, he could not have explained
to Placida that the deed actually transferred the conjugal
properties of Lauro Sumipat and Placida.11
The Court of Appeals, therefore, annulled the deed insofar as it
covers Placidas conjugal share in the subject properties because
the latters consent thereto was vitiated by mistake when she
affixed her signature on the document.
The petitioners filed a Motion for Reconsideration on the grounds
of estoppel, absence of fraud and prescription. The appellate court
denied the Motion for Reconsideration in its Resolution12 dated
October 16, 2002 ruling that the grounds relied upon have been
addressed in its Decision dated April 11, 2002. Anent the ground of
prescription, the appellate court held that since the properties were
acquired through fraud or mistake, the petitioners are considered
trustees of an implied trust for the benefit of Placida. Citing
jurisprudence,13 the Court of Appeals ruled that actions based on
implied or constructive trust prescribe 10 years from the issuance
of a Torrens Title over the property. Since two (2) of the subject
properties were issued Transfer Certificates of Title (TCT)
Numbered T-4003714 and T-4003815 under the petitioners names
on August 18, 1987, the Complaint for declaration of nullity of titles,
partition, recovery of ownership and possession, reconveyance,
accounting and damages, which was filed on March 3, 1993, was
filed well within the prescriptive period.
The petitioners are now before this Court principally claiming that
Placida freely consented to the execution of the deed and that they
did not commit fraudulent acts in connection with its execution.
They also reiterate their argument that the Court of Appeals should
have dismissed the case on the ground of prescription. It is their
contention that the present action being one to annul a contract on
the ground of fraud, it should have been filed within four (4) years
from the discovery of fraud or registration of the instrument with
the Registry of Deeds.
The respondents filed their Comment16 dated February 7, 2003,
essentially echoing the findings of the Court of Appeals on the
matter of Placidas consent. According to them, Placida was
deceived and misled into affixing her signature on the deed. They
further claim that Placida did not actually appear before the notary
public to acknowledge the instrument.
In their Reply17 dated April 29, 2003, the petitioners insist that
Placida was not illiterate and that Lauro Sumipat validly transferred
the titles over the properties in question to them. They also argue
that if Placida did not understand the import of the deed, she could
have questioned Lauro Sumipat about it since the deed was
executed a year before the latter died.
The trial court and the Court of Appeals are in agreement that the
subject properties are conjugal, having been acquired during the
marriage of Lauro Sumipat and Placida. They came out, however,
with disparate denouements. While the trial court upheld the
validity of the deed as an instrument of transfer of all the litigated
parcels of land in their entirety on the ground that Placida failed to
question its authenticity and due execution, the appellate court
struck the deed down insofar as the conjugal share of Placida is
concerned based on its finding that her consent was vitiated by
mistake.
At bottom, the crux of the controversy is whether the questioned
deed by its terms or under the surrounding circumstances has
validly transferred title to the disputed properties to the petitioners.
A perusal of the deed reveals that it is actually a gratuitous
disposition of property a donation although Lauro Sumipat
imposed upon the petitioners the condition that he and his wife,
Placida, shall be entitled to one-half (1/2) of all the fruits or
produce of the parcels of land for their subsistence and support.
The preliminary clauses of the deed read:
That conscious of my advanced age and failing health, I
feel that I am not capable anymore of attending to and
maintaining and keeping in continuous cultivation my
above described properties;
That my children are all desirous of taking over the task
of maintaining my properties and have demonstrated
since childhood the needed industry and hard work as
they have in fact established possession over my real
properties and introduced more improvements over my
lands, the fruit of which through their concerted efforts
and labors, I myself and my family have enjoyed;
That it would be to the best interest of my above
mentioned children that the ownership over my above
described properties be transferred in their names,
thereby encouraging them more in developing the lands
to its fullest productivity.18
The deed covers three (3) parcels of land.19 Being a donation of
immovable property, the requirements for validity set forth in Article
749 of the Civil Code should have been followed, viz:
Art. 749. In order that the donation of the immovable may
be valid, it must be made in a public document,
 specifying therein the property donated and the value of Q- This Lydia Sumipat you are referring to as one of the
the charges which the donee must satisfy. principal defendant and daughter of your husband with
his paramour, in January, 1983 what was her educational
attainment, if you know?
The acceptance may be made in the same deed of
donation or in a separate public document, but it shall not
take effect unless it is done during the lifetime of the A- She has already finished schooling.
donor.
Q- Do you know what she obtained?
If the acceptance is made in a separate instrument, the
donor shall be notified thereof in an authentic form, and
A- Teacher.
this step shall be noted in both instruments.

Q- You said she arrived in the afternoon of January 5,

Title to immovable property does not pass from the donor to the
1983 in your house while you were boiling water. What
donee by virtue of a deed of donation until and unless it has been did she do when she arrived there?
accepted in a public instrument and the donor duly notified thereof.
The acceptance may be made in the very same instrument of
donation. If the acceptance does not appear in the same A- She brought with her a paper.
document, it must be made in another. Where the deed of donation
fails to show the acceptance, or where the formal notice of the Q- What did she say to you?
acceptance, made in a separate instrument, is either not given to
the donor or else not noted in the deed of donation and in the
separate acceptance, the donation is null and void.20 A- She told me to sign that paper immediately because
there is the witness waiting and so I asked from her what
was that paper I am going to sign. I asked her because I
In this case, the donees acceptance of the donation is not am unlettered but she said never mind just sign this
manifested either in the deed itself or in a separate document. immediately.
Hence, the deed as an instrument of donation is patently void.

Q- By the way, what is your highest educational

We also note the absence of any proof of filing of the necessary attainment?
return, payment of donors taxes on the transfer, or exemption from
payment thereof. Under the National Internal Revenue Code of
1977, the tax code in force at the time of the execution of the deed, A- I have never gone to school.
an individual who makes any transfer by gift shall make a return
and file the same within 30 days after the date the gift is made with Q- Do you know how to read or to write?
the Revenue District Officer, Collection Agent or duly authorized
Treasurer of the municipality in which the donor was domiciled at
the time of the transfer.21 The filing of the return and payment of A- I know how to write only my name.
donors taxes are mandatory. In fact, the registrar of deeds is
mandated not to register in the registry of property any document Q- You know how to write your name only?
transferring real property by way of gifts inter vivos unless a
certification that the taxes fixed and actually due on the transfer
A- Yes, sir.
had been paid or that the transaction is tax exempt from the
Commissioner of Internal Revenue, in either case, is presented. 22
Q- You said she told you to sign that piece of paper and
you asked her what was that and she told you "you just
Neither can we give effect to the deed as a sale, barter or any
sign that", what did you do then?
other onerous conveyance, in the absence of valid cause or
consideration and consent competently and validly given.23 While it
is true that the appellate court found Placidas consent to have A- She was in a hurry to let me sign that document so I
been vitiated by mistake, her testimony on the matter actually signed it without knowing what was that.
makes out a case of total absence of consent, not merely vitiation
thereof. She testified in this regard, thus: Q- Did she tell you that piece of paper was a document
wherein the land including your land in Siayan were to be
Q- What have you been doing on that day on January 5, given to them?
1983?
A- I did not give my land.24
A- I was at home boiling water.
During cross-examination, Placida again denied any knowledge of
Q- While you were boiling water in the house, at that time the nature of the deed:
who arrived, if there was any?
q You are aware that the titles over these lots had
A- Lydia Sumipat arrived. already been transferred in the name of the defendants?

Court:-(To the witness) a They surreptitiously transferred the title in their names,
I do not know about it.
Q- Who is this Lydia Sumipat?
q You mean to say you signed a document transferring
them in their names?
A- The daughter of my husband with his paramour.

a There was a piece of paper brought to me to be signed

Q- How old was she?
by Lydia; I asked whats all about but she did not tell me;
I was forced to sign considering that according to her
A- I did not know if she was already 30 years old at that somebody was waiting for it.
time because he was born in 1950.
q What do you mean that you are force to sign?
Atty. Legorio:-(To the witness)
a She told me to sign that paper immediately because
Q- When you said Lydia Sumipat, you are referring to there is a witness waiting that paper but she was alone
one of the defendants in this case? when she came to me.

A- Yes, sir. She is the one. q So you signed that paper?

a I signed it because she was in a hurry.

 q That was done during the lifetime of your husband?
a Yes, sir.
q And your husband also signed that paper?
a I do not know because I have not seen my husband
signed, Lydia only came to me to let me sign that paper.
q Is it not a fact that you and your husband were brought
before the office of Judge Pacifico Garcia of Manukan,
and in the office you signed that document?
a I have not gone to the Municipal building of Manukan
and I do not know Judge Garcia.
q But what you know now that the titles are transferred in
the name of the defendants?
a It was Lydia who caused the transfer of the titles in their
names.
q And you know that fact when you signed that paper?
a At the time I signed the paper, I do not know yet that
the title would be transferred, it was only at the time
when I requested my niece to follow it up because
according to them I am no longer entitled to the land.25
26
In Baranda v. Baranda, this Court declared that the deeds of sale
questioned therein are not merely voidable (as intimated by the
plaintiffs themselves in their complaint for annulment of the deeds
and reconveyance of the lots) but null and void ab initio as the
supposed seller declared under oath that she signed the deeds
without knowing what they were. The significant circumstance
meant, the Court added, that her consent was not merely marred
by vices of consent so as to make the contracts voidable, but that
she had not given her consent at all.
Parenthetically, as Placidas Complaint is entitled Declaration of
Nullity of Titles; Contracts; Partition, Recovery of Ownership and
Possession; Reconveyance; Accounting and Damages with Prayer
for Preliminary Injunction and Receivership, the validity of the deed
was directly assailed, but its absolute nullity was not specifically
raised as an issue. Nevertheless, both the RTC and the appellate
court took the cue from Placidas theory that the deed is merely
voidable as regards her conjugal share of the properties. However,
since the real issue is whether the questioned deed has validly
transferred ownership of the litigated properties, it is appropriate
for the Court to inquire into the form of the deed and the existence
of valid consent thereto to ascertain the validity or nullity of the
deed.
From the substantive and procedural standpoints, the objectives to
write finis to a protracted litigation and avoid multiplicity of suits are
worth pursuing at all times. Conformably, we have ruled in a
number of cases that an appellate court is accorded broad
discretionary power to consider even errors not assigned. We have
applied this tenet, albeit as a matter of exception, in the following
instances: (1) grounds not assigned as errors but affecting
jurisdiction over the subject matter; (2) matters not assigned as
errors on appeal but are evidently plain or clerical errors within
contemplation of law; (3) matters not assigned as errors on appeal
but consideration of which is necessary in arriving at a just
decision and complete resolution of the case or to serve the
interests of justice or to avoid dispensing piecemeal justice; (4)
matters not specifically assigned as errors on appeal but raised in
the trial court and are matters of record having some bearing on
the issue submitted which the parties failed to raise or which the
lower court ignored; (5) matters not assigned as errors on appeal
but closely related to an error assigned; and (6) matters not
assigned as errors on appeal but upon which the determination of
a question properly assigned is dependent.27
In the instant case, the validity of the deed was directly assailed
although both parties are of the view that it is not an absolute
nullity. The correct characterization of the deed is, therefore,
determinative of the present controversy. Elsewise framed, the
issue of validity or nullity is interwoven with the positions adopted
by the parties and the rulings made by the courts below. Hence,
we shall be resolute in striking down the deed especially as it
appears on its face to be a patent nullity.
Having said this, we shall now proceed to the issue of prescription.
Being an absolute nullity, both as a donation and as a sale, the
deed is subject to attack at any time, in accordance with the rule in
Article 1410 of the Civil Code that an action to declare the
inexistence of a void contract does not prescribe.
We are thus unimpressed by the petitioners contention that the
appellate court should have dismissed Placidas appeal on the
ground of prescription. Passage of time cannot cure the fatal flaw
in an inexistent and void contract.28 The defect of inexistence of a
contract is permanent and incurable; hence, it cannot be cured
either by ratification or by prescription. 29
Turning now to the effects of the absolute nullity of the deed, it is
well-settled that when there is a showing of illegality, the property
registered is deemed to be simply held in trust for the real owner
by the person in whose name it is registered, and the former then
has the right to sue for the reconveyance of the property. The
action for the purpose is also imprescriptible. As long as the land
wrongfully registered under the Torrens system is still in the name
of the person who caused such registration, an action in
personam will lie to compel him to reconvey the property to the
real owner.30
One final note. After this Decision shall have become final and
executory, the parties may either extrajudicially divide the estates
of Lauro Sumipat and Placida Tabotabo pursuant to Rule 74 of the
Rules of Court or judicially settle the estates pursuant to Rules
78, et seq., in accordance with this Decision and the law.
WHEREFORE, the instant Petition for Review on Certiorari is
DENIED. The Decision of the Regional Trial Court dated
September 29, 1997 and the Decision of the Court of Appeals
dated April 11, 2002, as well as itsResolution dated October 16,
2002, are VACATED. In lieu thereof, judgment is hereby rendered
in favor of the respondents, to wit: (i) DECLARING the Deed of
Absolute Transfer and/or Quitclaim dated January 5, 1983 NULL
AND VOID; and (ii) ORDERING the CANCELLATION of Transfer
Certificates of Title Numbered T-40037 and T-40038 (Zamboanga
del Norte) and the tax declaration covering the unregistered parcel
of land, all issued in the names of the petitioners Lydia, Laurito,
Alicia, Alejandro and Lirafe, all surnamed Sumipat, and the
REINSTATEMENT of Original Certificate of Title No. P-17842
(Zamboanga del Norte) Transfer Certificate Title No. T-15826
(Zamboanga del Norte) and the tax declaration covering the
unregistered parcel of land, all in the name of "Lauro Sumipat . . .
married to Placida Tabotabo."
Costs against the petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 152168 December 10, 2004
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA
BALITE; Namely, ANTONIO T. BALITE, FLOR T. BALITE-
ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T.
BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T.
BALITE and AURELIO T. BALITE JR., All Represented by
GASPAR T. BALITE,petitioners,
vs.
RODRIGO N. LIM, respondent.
DECISION
PANGANIBAN, J.:
A deed of sale that allegedly states a price lower than the true
consideration is nonetheless binding between the parties and their
successors in interest. Furthermore, a deed of sale in which the
parties clearly intended to transfer ownership of the property
cannot be presumed to be an equitable mortgage under Article
1602 of the Civil Code. Finally, an agreement that purports to sell
in metes and bounds a specific portion of an unpartitioned co-
owned property is not void; it shall effectively transfer the sellers
ideal share in the co-ownership.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of
Court, assailing the February 11, 2002 Decision2of the Court of
Appeals (CA) in CA-GR CV No. 65395. The decretal portion of the
Decision reads as follows:
"IN THE LIGHT OF ALL THE FOREGOING, the
Decision of the Court a quo subject of the appeal is
herebySET ASIDE AND REVERSED and another
Decision is hereby rendered as follows:
1. The "Deed of Absolute Sale" (Exhibit "A") is valid
only insofar as the pro indiviso share of Esperanza Balite
over the property covered by Original Certificate of Title
No. 10824 is concerned;
2. The Register of Deeds is hereby ordered to cancel
Transfer Certificate of Title No. 6683 and to issue another
over the entirety of the property covered by Original
Certificate of Title No. 10824, upon the payment of the
capital gains tax due, as provided for by law, (based on
the purchase price of the property in the amount
of P1,000,000.00), with the following as co-owners, over
the property described therein:
a) Each of the [petitioners] over an undivided
portion of 975 square meters;
b) The [respondent], with an undivided portion
of 9,751 square meters.
3. The [respondent] is hereby ordered to pay to the
[petitioners] the amount of P120,000.00, within a period
of five (5) months from the finality of the Decision of this
Court;
4. In the event that the [respondent] refuses or fails to
remit the said amount to the [petitioner] within the period
therefor, the rights and obligations of the parties shall be
governed by Republic 6552 (Maceda Law)."3
The Facts
The CA summarized the facts in this manner:
"The spouses Aurelio x x x and Esperanza Balite were
the owners of a parcel of land, located [at] Poblacion
(Barangay Molave), Catarman, Northern Samar, with an
area of seventeen thousand five hundred fifty-one
(17,551) square meters, [and] covered by Original
Certificate of Title [OCT] No. 10824. When Aurelio died
intestate [in 1985, his wife], Esperanza Balite, and their
children, x x x [petitioners] Antonio Balite, Flor Balite-
Zamar, Visitacion Balite-Difuntorum, Pedro Balite, Pablo
Balite, Gaspar Balite, Cristeta (Tita) Balite and Aurelio
Balite, Jr., inherited the [subject] property and became
co-owners thereof, with Esperanza x x x inheriting an
undivided [share] of [9,751] square meters.
"In the meantime, Esperanza x x x [became] ill and was
in dire need of money for her hospital expenses x x x.
She, through her daughter, Cristeta, offered to sell to
Rodrigo Lim, [her] undivided share x x x for the price
of P1,000,000.00. x x x Esperanza x x x and Rodrigo x x
x agreed that, under the "Deed of Absolute Sale", to be
executed by Esperanza x x x over the property, it will be
made to appear that the purchase price of the property
would be P150,000.00, although the actual price agreed
upon by them for the property was P1,000,000.00.
"On April 16, 1996, Esperanza x x x executed a "Deed of
Absolute Sale" in favor of Rodrigo N. Lim over a portion
of the property, covered by [OCT] No. 10824, with an
area of 10,000 square meters, for the price
ofP150,000.00 x x x.
[They] also executed, on the same day, a "Joint Affidavit"
under which they declared that the real price of the
property was P1,000,000.00, payable to Esperanza x x x,
by installments, as follows:
1. P30,000.00 upon signing today of the
document of sale.
2. P170,000.00 payable upon completion of
the actual relocation survey of the land sold by
a Geodetic Engineer.
3. P200,000.00 payable on or before May 15,
1996.
4. P200,000.00 payable on or before July 15,
1996.
5. P200,000.00 payable on or before
September 15, 1996.
6. P200,000.00 payable on or before
December 15, 1996.
"Only Esperanza and two of her children, namely,
Antonio x x x and Cristeta x x x, knew about the said
transaction. x x x Geodetic Engineer Bonifacio G. Tasic
conducted a subdivision survey of the property and
prepared a "Sketch Plan" showing a portion of the
property, identified as Lot 243 with an area of 10,000
square meters, under the name Rodrigo N. Lim.
"The "Sketch Plan" was signed by Rodrigo x x x and
Esperanza. Thereafter, Rodrigo x x x took actual
possession of the property and introduced improvements
thereon. He remitted to Esperanza x x x and Cristeta x x
x sums of money in partial payments of the x x x property
for which he signed "Receipts".
"Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. x x x
learned of the sale, and on August 21, 1996, they wrote a
letter to the Register of Deeds [RD] of Northern Samar,
[saying] that they [were] not x x x informed of the sale of
a portion of the said property by their mother x x x nor did
they give their consent thereto, and requested the [RD]
to:
"x x x hold in abeyance any processal or
approval of any application for registration of
title of ownership in the name of the buyer of
said lot, which has not yet been partitioned
judicially or extrajudicially, until the issue of the
legality/validity of the above sale has been
cleared."
"On August 24, 1996, Antonio x x x received from
Rodrigo x x x, the amount of P30,000.00 in partial
payment of [the] property and signed a "Receipt" for the
said amount, declaring therein that "the remaining
balance of P350,000.00 shall personally and directly be
released to my mother, Esperanza Balite, only."
However, Rodrigo x x x drew and issued RCBC Check
No. 309171, dated August 26, 1996, [payable] to the
order of Antonio Balite in the amount of P30,000.00 in
partial payment of the property.
"On October 1, 1996, Esperanza x x x executed a
"Special Power of Attorney" appointing her son, Antonio,
to collect and receive, from Rodrigo, the balance of the
purchase price of the x x x property and to sign the
appropriate documents therefor.
"On October 23, 1996, Esperanza signed a letter
addressed to Rodrigo informing the latter that her
children did not agree to the sale of the property to him
 and that she was withdrawing all her commitments until
the validity of the sale is finally resolved:
xxx xxx xxx
"On October 31, 1996, Esperanza died intestate and was
survived by her aforenamed children.
"[Meanwhile], Rodrigo caused to be published, in the
Samar Reporter, on November 14, 21 and 28, 1996, the
aforesaid "Deed of Absolute Sale". Earlier, on November
21, 1996, Antonio received the amount ofP10,000.00
from Rodrigo for the payment of the estate tax due from
the estate of Esperanza.
"Also, the capital gains tax, in the amount of P14,506.25,
based on the purchase price of P150,000.00 appearing
on the "Deed of Absolute Sale", was paid to the Bureau
of Internal Revenue which issued a "Certification" of said
payments, on March 5, 1997, authorizing the registration
of the "Deed of Absolute Sale" x x x. However, the [RD]
refused to issue a title over the property to and under the
name of Rodrigo unless and until the owners duplicate
of OCT No. 10824 was presented to [it]. Rodrigo filed a
"Petition for Mandamus" against the RD with the
Regional Trial Court of Northern Samar (Rodrigo Lim
versus Fernando Abella, Special Civil Case No. 48). x
x x. On June 13, 1997, the court issued an Order to the
RD to cancel OCT No. 10824 and to issue a certificate of
title over Lot 243 under the name of Rodrigo.
"On June 27, 1997, [petitioners] filed a complaint against
Rodrigo with the Regional Trial Court of Northern Samar,
entitled and docketed as "Heirs of the Spouses Aurelio
Balite, et al. versus Rodrigo Lim, Civil Case No. 920,
for "Annulment of Sale, Quieting of Title, Injunction
and Damages x x x, [the origin of the instant case.]
xxx xxx xxx
"The [petitioners] had a "Notice of Lis Pendens", dated
June 23, 1997, annotated, on June 27, 1997, at the
dorsal portion of OCT No. 10824.
"In the meantime, the RD cancelled, on July 10, 1997,
OCT No. 10824 and issued Transfer Certificate of Title
[TCT] No. 6683 to and under the name of Rodrigo over
Lot 243. The "Notice of Lis Pendens" x x x was carried
over in TCT No. 6683.
"Subsequently, Rodrigo secured a loan from the Rizal
Commercial Banking Corporation in the amount
ofP2,000,000.00 and executed a "Real Estate Mortgage"
over the [subject] property as security therefor.
"On motion of the [petitioners], they were granted x x x
leave to file an "Amended Complaint" impleading the
bank as [additional] party-defendant. On November 26,
1997, [petitioners] filed their "Amended Complaint".
The [respondent] opposed the "Amended Complaint" x x
x contending that it was improper for [petitioners] to join,
in their complaint, an ordinary civil action for the
nullification of the "Real Estate Mortgage" executed by
the respondent in favor of the Bank as the action of the
petitioners before the court was a special civil action.
"On March 30, 1998, the court issued an Order rejecting
the "Amended Complaint" of the petitioners on the
grounds that: (a) the Bank cannot be impleaded as party-
defendant under Rule 63, Section 1 of the 1997 Rules of
Civil Procedure; (b) the "Amended Complaint" constituted
a collateral attack on TCT No. 6683. The [petitioners] did
not file any motion for the reconsideration of the order of
the court."4
The trial court dismissed the Complaint and ordered the
cancellation of the lis pendens annotated at the back of TCT No.
6683. It held that, pursuant to Article 493 of the Civil Code, a co-
owner has the right to sell his/her undivided share. The sale made
by a co-owner is not invalidated by the absence of the consent of
the other co-owners. Hence, the sale by Esperanza of the 10,000-
square-meter portion of the property was valid; the excess from
her undivided share should be taken from the undivided shares of
Cristeta and Antonio, who expressly agreed to and benefited from
the sale.
Ruling of the Court of Appeals
The CA held that the sale was valid and binding insofar as
Esperanza Balites undivided share of the property was concerned.
It affirmed the trial courts ruling that the lack of consent of the co-
owners did not nullify the sale. The buyer, respondent herein,
became a co-owner of the property to the extent of the pro
indiviso share of the vendor, subject to the portion that may be
allotted to him upon the termination of the co-ownership. The
appellate court disagreed with the averment of petitioners that the
registration of the sale and the issuance of TCT No. 6683 was
ineffective and that they became the owners of the share of
Esperanza upon the latters death.
The CA likewise rejected petitioners claim that the sale was void
allegedly because the actual purchase price of the property was
not stated in the Deed of Absolute Sale. It found that the true and
correct consideration for the sale was P1,000,000 as declared by
Esperanza and respondent in their Joint Affidavit. Applying Article
13535 of the Civil Code, it held that the falsity of the price or
consideration stated in the Deed did not render it void. The CA
pointed out, however, that the State retained the right to recover
the capital gains tax based on the true price ofP1,000,000.
The appellate court rejected petitioners contention that, because
of the allegedly unconscionably low and inadequate consideration
involved, the transaction covered by the Deed was an equitable
mortgage under Article 1602 of the Civil Code. Observing that the
argument had never been raised in the court a quo, it ruled that
petitioners were proscribed from making this claim, for the first
time, on appeal.
The CA further held that the remaining liability of respondent
was P120,000. It relied on the Receipt dated August 24, 1996,
which stated that his outstanding balance for the consideration
was P350,000. It deducted therefrom the amounts of P30,000
received by Antonio on August 27, 1996; and P200,000, which was
the amount of the check dated September 15, 1996, issued by
respondent payable to Esperanza.
Finally, the appellate court noted that the mortgage over the
property had been executed after the filing of the Complaint. What
petitioners should have filed was a supplemental complaint instead
of an amended complaint. Contrary to respondents argument, it
also held that the bank was not an indispensable party to the case;
but was merely a proper party. Thus, there is no necessity to
implead it as party-defendant, although the court a quo had the
option to do so. And even if it were not impleaded, the appellate
court ruled that the bank would still have been bound by the
outcome of the case, as the latter was a mortgagee pendente
lite over real estate that was covered by a certificate of title with an
annotated lis pendens.
Hence, this Petition.6
Issues
In their Memorandum, petitioners present the following issues:
"A
"Whether or not the [CA] seriously erred in not deciding
that the Deed of Absolute Sale dated April 16, 1996 is
null and void on the grounds that it is falsified; it has an
unlawful cause; and it is contrary to law and/or public
policy.
"B
"Whether or not the [CA] gravely erred in not finding that
the amount paid by [respondent] is only three hundred
twenty thousand (P320,000.00) pesos and that
respondents claim that he has paid one million pesos
except P44,000.00 as balance, is fraudulent and false.
"C
 "Whether or not the [CA] seriously erred in not deciding
that at the time the Deed of Sale was registered x x x on
May 30, 1997, said Deed of Sale can no longer bind the
property covered by OCT No. 10824 because said land
had already become the property of all the petitioners
upon the death of their mother on October 31, 1996 and
therefore such registration is functus of[f]icio involving a
null and void document.
"D
"Whether or not the [CA] seriously erred in not ruling that
petitioners amended complaint dated November 27,
1997 was proper and admissible and deemed admitted
to conform to evidence presented.
"E
"Whether or not the [CA] seriously erred in not declaring
that TCT No. T-6683 in the name of Respondent Rodrigo
N. Lim is null and void and all dealings involving the
same are likewise null and void and/or subject to the
decision of the case at bar in view of the notice of lis
pendens annotated therein.
"F
"Even assuming but without admitting that the Deed of
Sale is enforceable, the respondent court seriously erred
in not deciding that the consideration is unconscionably
low and inadequate and therefore the transaction
between the executing parties constitutes an equitable
mortgage.
"G
"The [CA] greatly erred in not rendering judgment
awarding damages and attorneys fee[s] in favor of
petitioners among others."7
In sum, the issues raised by petitioners center on the following: 1)
whether the Deed of Absolute Sale is valid, and 2) whether there is
still any sum for which respondent is liable.
The Courts Ruling
The Petition has no merit.
First Issue:
Validity of the Sale
Petitioners contend that the Deed of Absolute Sale is null and void,
because the undervalued consideration indicated therein was
intended for an unlawful purpose -- to avoid the payment of higher
capital gains taxes on the transaction. According to them, the
appellate courts reliance on Article 1353 of the Civil Code was
erroneous. They further contend that the Joint Affidavit is not proof
of a true and lawful cause, but an integral part of a scheme to
evade paying lawful taxes and registration fees to the government.
We have before us an example of a simulated contract. Article
1345 of the Civil Code provides that the simulation of a contract
may either be absolute or relative. In absolute simulation, there is
a colorable contract but without any substance, because the
parties have no intention to be bound by it. An absolutely simulated
contract is void, and the parties may recover from each other what
they may have given under the "contract."8 On the other hand, if
the parties state a false cause in the contract to conceal their real
agreement, such a contract is relatively simulated. Here, the
parties real agreement binds them.9
In the present case, the parties intended to be bound by the
Contract, even if it did not reflect the actual purchase price of the
property. That the parties intended the agreement to produce legal
effect is revealed by the letter of Esperanza Balite to respondent
dated October 23, 199610 and petitioners admission that there was
a partial payment of P320,000 made on the basis of the Deed of
Absolute Sale. There was an intention to transfer the ownership of
over 10,000 square meters of the property . Clear from the letter is
the fact that the objections of her children prompted Esperanza to
unilaterally withdraw from the transaction.
Since the Deed of Absolute Sale was merely relatively simulated, it
remains valid and enforceable. All the essential requisites
prescribed by law for the validity and perfection of contracts are
present. However, the parties shall be bound by their real
agreement for a consideration of P1,000,000 as reflected in their
Joint Affidavit.11
The juridical nature of the Contract remained the same. What was
concealed was merely the actual price. Where the essential
requisites are present and the simulation refers only to the content
or terms of the contract, the agreement is absolutely binding and
enforceable12 between the parties and their successors in interest.
Petitioners cannot be permitted to unmake the Contract voluntarily
entered into by their predecessor, even if the stated consideration
was included therein for an unlawful purpose. "The binding force of
a contract must be recognized as far as it is legally possible to do
so."13 However, as properly held by the appellate court, the
government has the right to collect the proper taxes based on the
correct purchase price.
Being onerous, the Contract had for its cause or consideration the
price of P1,000,000. Both this consideration as well as the subject
matter of the contract -- Esperanzas share in the property covered
by OCT No. 10824 -- are lawful. The motives of the contracting
parties for lowering the price of the sale -- in the present case, the
reduction of capital gains tax liability -- should not be confused with
the consideration.14 Although illegal, the motives neither determine
nor take the place of the consideration. 15
Deed of Sale not an
Equitable Mortgage
Petitioner further posits that even assuming that the deed of sale is
valid it should only be deemed an equitable mortgage pursuant to
Articles 1602 and 1604 of the Civil Code, because the price was
clearly inadequate. They add that the presence of only one of the
circumstances enumerated under Article 1602 would be sufficient
to consider the Contract an equitable mortgage. We disagree.
For Articles 1602 and 1604 to apply, two requisites must
concur: one, the parties entered into a contract denominated as a
contract of sale; and, two, their intention was to secure an existing
debt by way of mortgage.16
Indeed, the existence of any of the circumstances enumerated in
Article 1602, not a concurrence or an overwhelming number
thereof, suffices to give rise to the presumption that a
contract purporting to be an absolute sale is actually an equitable
mortgage.17 In the present case, however, the Contract does not
merely purport to be an absolute sale. The records and the
documentary evidence introduced by the parties indubitably show
that the Contract is, indeed, one of absolute sale. There is no clear
and convincing evidence that the parties agreed upon a mortgage
of the subject property.
Furthermore, the voluntary, written and unconditional acceptance
of contractual commitments negates the theory of equitable
mortgage. There is nothing doubtful about the terms of, or the
circumstances surrounding, the Deed of Sale that would call for
the application of Article 1602. The Joint Affidavit indisputably
confirmed that the transaction between the parties was a sale.
When the words of a contract are clear and readily
understandable, there is no room for construction. Contracts are to
be interpreted according to their literal meaning and should not be
interpreted beyond their obvious intendment.18 The contract is the
law between the parties.
Notably, petitioners never raised as an issue before the trial court
the fact that the document did not express the true intent and
agreement of the contracting parties. They raised mere
suppositions on the inadequacy of the price, in support of their
argument that the Contract should be considered as an equitable
mortgage.
We find no basis to conclude that the purchase price of the
property was grossly inadequate. Petitioners did not present any
witness to testify as to the market values of real estate in the
subjects locale. They made their claim on the basis alone of
the P2,000,000 loan that respondent had been able to obtain from
the Rizal Commercial Banking Corporation. This move did not
sufficiently show the alleged inadequacy of the purchase price. A
mortgage is a mere security for a loan. There was no showing that
the property was the only security relied upon by the bank; or that
the borrowers had no credit worthiness, other than the property
offered as collateral.
Co-Ownership
The appellate court was correct in affirming the validity of the sale
of the property insofar as the pro indiviso share of Esperanza
Balite was concerned.
Article 493 of the Civil Code19 gives the owner of an undivided
interest in the property the right to freely sell and dispose of such
interest. The co-owner, however, has no right to sell or alienate a
specific or determinate part of the thing owned in common,
because such right over the thing is represented by an aliquot or
ideal portion without any physical division. Nonetheless, the mere
fact that the deed purports to transfer a concrete portion does not
per se render the sale void.20 The sale is valid, but only with
respect to the aliquot share of the selling co-owner. Furthermore,
the sale is subject to the results of the partition upon the
termination of the co-ownership.
Hence, the transaction between Esperanza Balite and respondent
could be legally recognized only in respect to the formers pro
indiviso share in the co-ownership. As a matter of fact, the Deed of
Absolute Sale executed between the parties expressly referred to
the 10,000-square-meter portion of the land sold to respondent as
the share of Esperanza in the conjugal property. Her clear intention
was to sell merely her ideal or undivided share in it. No valid
objection can be made against that intent. Clearly then, the sale
can be given effect to the extent of 9,751 square meters, her ideal
share in the property as found by both the trial and the appellate
courts.
Transfer of Property
During her lifetime, Esperanza had already sold to respondent her
share in the subject parcel; hence her heirs could no longer inherit
it. The property she had transferred or conveyed no longer formed
part of her estate to which her heirs may lay claim at the time of
her death. The transfer took effect on April 16, 1996 (the date the
Deed of Absolute Sale was executed), and not on May 30, 1997,
when the Deed of Absolute Sale was registered. Thus, petitioners
claim that the property became theirs upon the death of their
mother is untenable.
Second Issue:
Respondents Liability
Petitioners insist that the appellate court erred in holding that
respondents outstanding liability on the Deed of Sale
was P120,000, when the Receipts on record show payments in the
total amount of P320,000 only. They argue that the August 24,
1996 Receipt, on which the appellate court based its conclusion,
was unreliable.
To begin with, this Court is not a trier of facts. 21 It is not its function
to examine and determine the weight of the evidence. Well-
entrenched is the doctrine that only errors of law,22 and not of facts,
are reviewable by this Court in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court. Philippine Airlines,
Inc. v. Court of Appeals23 has held that factual findings of the Court
of Appeals are binding and conclusive upon the Supreme Court.
These findings may be reviewed24 only under exceptional
circumstances such as, among others, when the inference is
manifestly mistaken;25 the judgment is based on a
misapprehension of facts;26 findings of the trial court contradict
those of the CA;27 or the CA manifestly overlooked certain relevant
and undisputed facts that, if properly considered, would justify a
different conclusion.28
Although the factual findings of the two lower courts were not
identical, we hold that in the present case, the findings of the CA
are in accord with the documents on record. The trial court
admitted in evidence the August 24, 1996 Receipt signed by
Antonio Balite. Interestingly, he was never presented in the lower
court to dispute the veracity of the contents of that Receipt,
particularly the second paragraph that had categorically stated the
outstanding balance of respondent as of August 24, 1996, to
be P350,000. Furthermore, the evidence shows that subsequent
payments of P30,000 and P200,000 were made by the latter.
Thus, we affirm the CAs Decision holding that the remaining
unpaid balance of the price was P120,000.
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED. Costs against the petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162421 August 31, 2007
NELSON CABALES and RITO CABALES, Petitioners,
vs.
COURT OF APPEALS, JESUS FELIANO and ANUNCIACION
FELIANO, Respondents.
DECISION
PUNO, C.J.:
This is a petition for review on certiorari seeking the reversal of the
decision1 of the Court of Appeals dated October 27, 2003, in CA-
G.R. CV No. 68319 entitled "Nelson Cabales and Rito Cabales v.
Jesus Feliano and Anunciacion Feliano," which affirmed with
modification the decision2 of the Regional Trial Court of Maasin,
Southern Leyte, Branch 25, dated August 11, 2000, in Civil Case
No. R-2878. The resolution of the Court of Appeals dated February
23, 2004, which denied petitioners motion for reconsideration, is
likewise herein assailed.
The facts as found by the trial court and the appellate court are
well established.
Rufino Cabales died on July 4, 1966 and left a 5,714-square meter
parcel of land located in Brgy. Rizal, Sogod, Southern Leyte,
covered by Tax Declaration No. 17270 to his surviving wife
Saturnina and children Bonifacio, Albino, Francisco, Leonora,
Alberto and petitioner Rito.
On July 26, 1971, brothers and co-owners Bonifacio, Albino and
Alberto sold the subject property to Dr. Cayetano Corrompido
for P2,000.00, with right to repurchase within eight (8) years. The
three (3) siblings divided the proceeds of the sale among
themselves, each getting a share of P666.66.
The following month or on August 18, 1971, Alberto secured a note
("vale") from Dr. Corrompido in the amount ofP300.00.
In 1972, Alberto died leaving his wife and son, petitioner Nelson.
On December 18, 1975, within the eight-year redemption period,
Bonifacio and Albino tendered their payment ofP666.66 each to Dr.
Corrompido. But Dr. Corrompido only released the document of
sale with pacto de retro after Saturnina paid for the share of her
deceased son, Alberto, including his "vale" of P300.00.
On even date, Saturnina and her four (4) children Bonifacio,
Albino, Francisco and Leonora sold the subject parcel of land to
respondents-spouses Jesus and Anunciacion Feliano
for P8,000.00. The Deed of Sale provided in its last paragraph,
thus:
It is hereby declared and understood that the amount of TWO
THOUSAND TWO HUNDRED EIGHTY SIX PESOS (P2,286.00)
corresponding and belonging to the Heirs of Alberto Cabales and
to Rito Cabales who are still minors upon the execution of this
instrument are held
in trust by the VENDEE and to be paid and delivered only to them
upon reaching the age of 21.
On December 17, 1985, the Register of Deeds of Southern Leyte
issued Original Certificate of Title No. 17035 over the purchased
land in the names of respondents-spouses.
On December 30, 1985, Saturnina and her four (4) children
executed an affidavit to the effect that petitioner Nelson would only
receive the amount of P176.34 from respondents-spouses when
he reaches the age of 21 considering that Saturnina paid Dr.
Corrompido P966.66 for the obligation of petitioner Nelsons late
father Alberto, i.e., P666.66 for his share in the redemption of the
sale with pacto de retro as well as his "vale" ofP300.00.
On July 24, 1986, 24-year old petitioner Rito Cabales
acknowledged receipt of the sum of P1,143.00 from respondent
Jesus Feliano, representing the formers share in the proceeds of
the sale of subject property.
In 1988, Saturnina died. Petitioner Nelson, then residing in Manila,
went back to his fathers hometown in Southern Leyte. That same
year, he learned from his uncle, petitioner Rito, of the sale of
subject property. In 1993, he signified his intention to redeem the
subject land during a barangay conciliation process that he
initiated.
On January 12, 1995, contending that they could not have sold
their respective shares in subject property when they were minors,
petitioners filed before the Regional Trial Court of Maasin,
Southern Leyte, a complaint for redemption of the subject land
plus damages.
In their answer, respondents-spouses maintained that petitioners
were estopped from claiming any right over subject property
considering that (1) petitioner Rito had already received the
amount corresponding to his share of the proceeds of the sale of
subject property, and (2) that petitioner Nelson failed to consign to
the court the total amount of the redemption price necessary for
legal redemption. They prayed for the dismissal of the case on the
grounds of laches and prescription.
No amicable settlement was reached at pre-trial. Trial ensued and
on August 11, 2000, the trial court ruled against petitioners. It held
that (1) Alberto or, by his death, any of his heirs including petitioner
Nelson lost their right to subject land when not one of them
repurchased it from Dr. Corrompido; (2) Saturnina was effectively
subrogated to the rights and interests of Alberto when she paid for
Albertos share as well as his obligation to Dr. Corrompido; and (3)
petitioner Rito had no more right to redeem his share to subject
property as the sale by Saturnina, his legal guardian pursuant to
Section 7, Rule 93 of the Rules of Court, was perfectly valid; and it
was shown that he received his share of the proceeds of the sale
on July 24, 1986, when he was 24 years old.
On appeal, the Court of Appeals modified the decision of the trial
court. It held that the sale by Saturnina of petitioner Ritos
undivided share to the property was unenforceable for lack of
authority or legal representation but that the contract was
effectively ratified by petitioner Ritos receipt of the proceeds on
July 24, 1986. The appellate court also ruled that petitioner Nelson
is co-owner to the extent of one-seventh (1/7) of subject property
as Saturnina was not subrogated to Albertos rights when she
repurchased his share to the property. It further directed petitioner
Nelson to pay the estate of the late Saturnina Cabales the amount
of P966.66, representing the amount which the latter paid for the
obligation of petitioner Nelsons late father Alberto. Finally,
however, it denied petitioner Nelsons claim for redemption for his
failure to tender or consign in court the redemption money within
the period prescribed by law.
In this petition for review on certiorari, petitioners contend that the
Court of Appeals erred in (1) recognizing petitioner Nelson
Cabales as co-owner of subject land but denied him the right of
legal redemption, and (2) not recognizing petitioner Rito Cabales
as co-owner of subject land with similar right of legal redemption.
First, we shall delineate the rights of petitioners to subject land.
When Rufino Cabales died intestate, his wife Saturnina and his six
(6) children, Bonifacio, Albino, Francisco, Leonora, Alberto and
petitioner Rito, survived and succeeded him. Article 996 of the
New Civil Code provides that "[i]f a widow or widower and
legitimate children or descendants are left, the surviving spouse
has in the succession the same share as that of each of the
children." Verily, the seven (7) heirs inherited equally on subject
property. Petitioner Rito and Alberto, petitioner Nelsons father,
inherited in their own rights and with equal shares as the others.
But before partition of subject land was effected, Alberto died. By
operation of law, his rights and obligations to one-seventh of
subject land were transferred to his legal heirs his wife and his
son petitioner Nelson.
We shall now discuss the effects of the two (2) sales of subject
land to the rights of the parties.
The first sale with pacto de retro to Dr. Corrompido by the brothers
and co-owners Bonifacio, Albino and Alberto was valid but only as
to their pro-indiviso shares to the land. When Alberto died prior to
repurchasing his share, his rights and obligations were transferred
to and assumed by his heirs, namely his wife and his son,
petitioner Nelson. But the records show that it was Saturnina,
Albertos mother, and not his heirs, who repurchased for him. As
correctly ruled by the Court of Appeals, Saturnina was not
subrogated to Albertos or his heirs rights to the property when she
repurchased the share.
In Paulmitan v. Court of Appeals,3 we held that a co-owner who
redeemed the property in its entirety did not make her the owner of
all of it. The property remained in a condition of co-ownership as
the redemption did not provide for a mode of terminating a co-
ownership.4 But the one who redeemed had the right to be
reimbursed for the redemption price and until reimbursed, holds a
lien upon the subject property for the amount due.5Necessarily,
when Saturnina redeemed for Albertos heirs who had then
acquired his pro-indiviso share in subject property, it did not vest in
her ownership over the pro-indiviso share she redeemed. But she
had the right to be reimbursed for the redemption price and held a
lien upon the property for the amount due until reimbursement.
The result is that the heirs of Alberto, i.e., his wife and his son
petitioner Nelson, retained ownership over their pro-indiviso share.
Upon redemption from Dr. Corrompido, the subject property was
resold to respondents-spouses by the co-owners. Petitioners Rito
and Nelson were then minors and as indicated in the Deed of Sale,
their shares in the proceeds were held in trust by respondents-
spouses to be paid and delivered to them upon reaching the age of
majority.
As to petitioner Rito, the contract of sale was unenforceable as
correctly held by the Court of Appeals. Articles 320 and 326 of the
New Civil Code6 state that:
Art. 320. The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under parental
authority. If the property is worth more than two thousand pesos,
the father or mother shall give a bond subject to the approval of
the Court of First Instance.
Art. 326. When the property of the child is worth more than two
thousand pesos, the father or mother shall be considered a
guardian of the childs property, subject to the duties and
obligations of guardians under the Rules of Court.
In other words, the father, or, in his absence, the mother, is
considered legal administrator of the property pertaining to the
child under his or her parental authority without need of giving a
bond in case the amount of the property of the child does not
exceed two thousand pesos.7 Corollary to this, Rule 93, Section 7
of the Revised Rules of Court of 1964, applicable to this case,
automatically designates the parent as legal guardian of the child
without need of any judicial appointment in case the latters
property does not exceed two thousand pesos,8 thus:
Sec. 7. Parents as guardians. When the property of the child
under parental authority is worth two thousand pesos or less, the
father or the mother, without the necessity of court appointment,
shall be his legal guardian x x x x9
Saturnina was clearly petitioner Ritos legal guardian without
necessity of court appointment considering that the amount of his
property or one-seventh of subject property was P1,143.00, which
is less than two thousand pesos. However, Rule 96, Sec.
110 provides that:
Section 1. To what guardianship shall extend. A guardian
appointed shall have the care and custody of the person of his
ward, and the management of his estate, or the management of
the estate only, as the case may be. The guardian of the estate of
a nonresident shall have the management of all the estate of the
ward within the Philippines, and no court other than that in which
such guardian was appointed shall have jurisdiction over the
guardianship.
Indeed, the legal guardian only has the plenary power of
administration of the minors property. It does not include the
power of alienation which needs judicial authority.11 Thus, when
Saturnina, as legal guardian of petitioner Rito, sold the latters pro-
indiviso share in subject land, she did not have the legal authority
to do so.
Article 1403 of the New Civil Code provides, thus:
Art. 1403. The following contracts are unenforceable, unless they
are ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers;
xxxx
Accordingly, the contract of sale as to the pro-indiviso share of
petitioner Rito was unenforceable. However, when he
acknowledged receipt of the proceeds of the sale on July 24, 1986,
petitioner Rito effectively ratified it. This act of ratification rendered
the sale valid and binding as to him.
With respect to petitioner Nelson, on the other hand, the contract
of sale was void. He was a minor at the time of the sale. Saturnina
or any and all the other co-owners were not his legal guardians
with judicial authority to alienate or encumber his property. It was
his mother who was his legal guardian and, if duly authorized by
the courts, could validly sell his undivided share to the property.
She did not. Necessarily, when Saturnina and the others sold the
subject property in its entirety to respondents-spouses, they only
sold and transferred title to their pro-indiviso shares and not that
part which pertained to petitioner Nelson and his mother.
Consequently, petitioner Nelson and his mother retained
ownership over their undivided share of subject property.12
But may petitioners redeem the subject land from respondents-
spouses? Articles 1088 and 1623 of the New Civil Code are
pertinent:
Art. 1088. Should any of the heirs sell his hereditary rights to a
stranger before the partition, any or all of the co-heirs may be
subrogated to the rights of the purchaser by reimbursing him for
the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the
vendor.
Art. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The
deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining
owners.
Clearly, legal redemption may only be exercised by the co-owner
or co-owners who did not part with his or their pro-indiviso share in
the property held in common. As demonstrated, the sale as to the
undivided share of petitioner Rito became valid and binding upon
his ratification on July 24, 1986. As a result, he lost his right to
redeem subject property.
However, as likewise established, the sale as to the undivided
share of petitioner Nelson and his mother was not valid such that
they were not divested of their ownership thereto. Necessarily,
they may redeem the subject property from respondents-spouses.
But they must do so within thirty days from notice in writing of the
sale by their co-owners vendors. In reckoning this period, we held
in Alonzo v. Intermediate Appellate Court,13 thus:
x x x we test a law by its results; and likewise, we may add, by its
purposes. It is a cardinal rule that, in seeking the meaning of the
law, the first concern of the judge should be to discover in its
provisions the intent of the lawmaker. Unquestionably, the law
should never be interpreted in such a way as to cause injustice as
this is never within the legislative intent. An indispensable part of
that intent, in fact, for we presume the good motives of the
legislature, is to render justice.
Thus, we interpret and apply the law not independently of but in
consonance with justice. Law and justice are inseparable, and we
must keep them so. x x x x
x x x x While we may not read into the law a purpose that is not
there, we nevertheless have the right to read out of it the reason
for its enactment. In doing so, we defer not to "the letter that
killeth" but to "the spirit that vivifieth," to give effect to the
lawmakers will.
In requiring written notice, Article 1088 (and Article 1623 for that
matter)14 seeks to ensure that the redemptioner is properly notified
of the sale and to indicate the date of such notice as the starting
time of the 30-day period of redemption. Considering the shortness
of the period, it is really necessary, as a general rule, to pinpoint
the precise date it is supposed to begin, to obviate the problem of
alleged delays, sometimes consisting of only a day or two.1awph!1
In the instant case, the right of redemption was invoked not days
but years after the sale was made in 1978. We are not unmindful
of the fact that petitioner Nelson was a minor when the sale was
perfected. Nevertheless, the records show that in 1988, petitioner
Nelson, then of majority age, was informed of the sale of subject
property. Moreover, it was noted by the appellate court that
petitioner Nelson was likewise informed thereof in 1993 and he
signified his intention to redeem subject property during a
barangay conciliation process. But he only filed the complaint for
legal redemption and damages on January 12, 1995, certainly
more than thirty days from learning about the sale.
In the face of the established facts, petitioner Nelson cannot feign
ignorance of the sale of subject property in 1978. To require strict
proof of written notice of the sale would be to countenance an
obvious false claim of lack of knowledge thereof, thus commending
the letter of the law over its purpose, i.e., the notification of
redemptioners.
The Court is satisfied that there was sufficient notice of the sale to
petitioner Nelson. The thirty-day redemption period commenced in
1993, after petitioner Nelson sought the barangay conciliation
process to redeem his property. By January 12, 1995, when
petitioner Nelson filed a complaint for legal redemption and
damages, it is clear that the thirty-day period had already expired.
As in Alonzo, the Court, after due consideration of the facts of the
instant case, hereby interprets the law in a way that will render
justice.15
Petitioner Nelson, as correctly held by the Court of Appeals, can
no longer redeem subject property. But he and his mother remain
co-owners thereof with respondents-spouses. Accordingly, title to
subject property must include them.
IN VIEW WHEREOF, the petition is DENIED. The assailed
decision and resolution of the Court of Appeals of October 27,
2003 and February 23, 2004 are AFFIRMED WITH
MODIFICATION. The Register of Deeds of Southern Leyte is
ORDERED to cancel Original Certificate of Title No. 17035 and to
issue in lieu thereof a new certificate of title in the name of
respondents-spouses Jesus and Anunciacion Feliano for the 6/7
portion, and petitioner Nelson Cabales and his mother for the
remaining 1/7 portion, pro indiviso.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 133638 April 15, 2005
PERPETUA VDA. DE APE, Petitioner,
vs.
THE HONORABLE COURT OF APPEALS and GENOROSA
CAWIT VDA. DE LUMAYNO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the Decision1 of
the Court of Appeals in CA-G.R. CV No. 45886 entitled, "Generosa
Cawit de Lumayno, accompanied by her husband Braulio
Lumayno v. Fortunato Ape, including his wife Perpetua de Ape."
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of land
particularly known as Lot No. 2319 of the Escalante Cadastre of
Negros Occidental and covered by Original Certificate of Title
(OCT) No. RP 1379 (RP-154 [300]).2Upon Cleopas Ape's death
sometime in 1950, the property passed on to his wife, Maria
Ondoy, and their eleven (11) children, namely: Fortunato,
Cornelio, Bernalda, Bienvenido, Encarnacion, Loreta, Lourdes,
Felicidad, Adela, Dominador, and Angelina, all surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno (private
respondent herein), joined by her husband, Braulio,3instituted a
case for "Specific Performance of a Deed of Sale with Damages"
against Fortunato and his wife Perpetua (petitioner herein) before
the then Court of First Instance of Negros Occidental. It was
alleged in the complaint that on 11 April 1971, private respondent
and Fortunato entered into a contract of sale of land under which
for a consideration of P5,000.00, Fortunato agreed to sell his share
in Lot No. 2319 to private respondent. The agreement was
contained in a receipt prepared by private respondent's son-in-law,
Andres Flores, at her behest. Said receipt was attached to the
complaint as Annex "A" thereof and later marked as Exhibit "G" for
private respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de
Lumayno the sum of THIRTY PESOS ONLY as Advance
Payment of my share in Land Purchased, for FIVE
THOUSAND PESOS LOT #2319.
(Signed)
FORTUNATO APE
P30.00 WITNESS:
(Illegible)4
As private respondent wanted to register the claimed sale
transaction, she supposedly demanded that Fortunato execute the
corresponding deed of sale and to receive the balance of the
consideration. However, Fortunato unjustifiably refused to heed
her demands. Private respondent, therefore, prayed that
Fortunato be ordered to execute and deliver to her "a sufficient and
registrable deed of sale involving his one-eleventh (1/11) share or
participation in Lot No. 2319 of the Escalante Cadastre; to pay
P5,000.00 in damages; P500.00 reimbursement for litigation
expenses as well as additional P500.00 for every appeal made;
P2,000.00 for attorney's fees; and to pay the costs.5
Fortunato and petitioner denied the material allegations of the
complaint and claimed that Fortunato never sold his share in Lot
No. 2319 to private respondent and that his signature appearing
on the purported receipt was forged. By way of counterclaim, the
defendants below maintained having entered into a contract of
lease with respondent involving Fortunato's portion of Lot No.
2319. This purported lease contract commenced in 1960 and was
supposed to last until 1965 with an option for another five (5)
years. The annual lease rental was P100.00 which private
respondent and her husband allegedly paid on installment basis.
Fortunato and petitioner also assailed private respondent and her
husband's continued possession of the rest of Lot No. 2319
alleging that in the event they had acquired the shares of
Fortunato's co-owners by way of sale, he was invoking his right to
redeem the same. Finally, Fortunato and petitioner prayed that the
lease contract between them and respondent be ordered annulled;
and that respondent be ordered to pay them attorney's fees; moral
damages; and exemplary damages.6
In their reply,7 the private respondent and her husband alleged that
they had purchased from Fortunato's co-owners, as evidenced by
various written instruments,8 their respective portions of Lot No.
2319. By virtue of these sales, they insisted that Fortunato was no
longer a co-owner of Lot No. 2319 thus, his right of redemption no
longer existed.
Prior to the resolution of this case at the trial court level, Fortunato
died and was substituted in this action by his children named
Salodada, Clarita, Narciso, Romeo, Rodrigo, Marieta, Fortunato,
Jr., and Salvador, all surnamed Ape.9
During the trial, private respondent testified that she and her
husband acquired the various portions of Lot No. 2319 belonging
to Fortunato's co-owners. Thereafter, her husband caused the
annotation of an adverse claim on the certificate of title of Lot No.
2319.10 The annotation states:
Entry No. 123539 Adverse claim filed by Braulio Lumayno.
Notice of adverse claim filed by Braulio Lumayno affecting the lot
described in this title to the extent of 77511.93 square meters,
more or less, the aggregate area of shares sold to him on the
basis of (alleged) sales in his possession. Doc. No. 157, Page No.
33, Book No. XI, Series of 1967 of Alexander Cawit of Escalante,
Neg. Occ. Date of instrument. June 22, 1967 at 8:30 a.m. (SGD)
FEDENCIORRAZ, Actg. Register of Deeds.11
In addition, private respondent claimed that after the acquisition of
those shares, she and her husband had the whole Lot No. 2319
surveyed by a certain Oscar Mascada who came up with a
technical description of said piece of land.12 Significantly, private
respondent alleged that Fortunato was present when the survey
was conducted.13
Also presented as evidence for private respondent were pictures
taken of some parts of Lot No. 2319 purportedly showing the land
belonging to Fortunato being bounded by a row of banana plants
thereby separating it from the rest of Lot No. 2319.14
As regards the circumstances surrounding the sale of Fortunato's
portion of the land, private respondent testified that Fortunato went
to her store at the time when their lease contract was about to
expire. He allegedly demanded the rental payment for his land but
as she was no longer interested in renewing their lease
agreement, they agreed instead to enter into a contract of sale
which Fortunato acceded to provided private respondent bought
his portion of Lot No. 2319 for P5,000.00. Thereafter, she asked
her son-in-law Flores to prepare the aforementioned receipt.
Flores read the document to Fortunato and asked the latter
whether he had any objection thereto. Fortunato then went on to
affix his signature on the receipt.
For her part, petitioner insisted that the entire Lot No. 2319 had not
yet been formally subdivided;15 that on 11 April 1971 she and her
husband went to private respondent's house to collect past rentals
for their land then leased by the former, however, they managed to
collect only thirty pesos;16 that private respondent made her
(petitioner's) husband sign a receipt acknowledging the receipt of
said amount of money;17 and that the contents of said receipt were
never explained to them.18 She also stated in her testimony that
her husband was an illiterate and only learned how to write his
name in order to be employed in a sugar central.19 As for private
respondent's purchase of the shares owned by Fortunato's co-
owners, petitioner maintained that neither she nor her husband
received any notice regarding those sales transactions.20 The
testimony of petitioner was later on corroborated by her daughter-
in-law, Marietta Ape Dino.21
After due trial, the court a quo rendered a decision 22 dismissing
both the complaint and the counterclaim. The trial court likewise
ordered that deeds or documents representing the sales of the
shares previously owned by Fortunato's co-owners be registered
and annotated on the existing certificate of title of Lot No. 2319.
According to the trial court, private respondent failed to prove that
she had actually paid the purchase price of P5,000.00 to Fortunato
and petitioner. Applying, therefore, the provision of Article 1350 of
the Civil Code,23 the trial court concluded that private respondent
did not have the right to demand the delivery to her of the
registrable deed of sale over Fortunato's portion of the Lot No.
2319.
The trial court also rejected Fortunato and petitioner's claim that
they had the right of redemption over the shares previously sold to
private respondent and the latter's husband, reasoning as follows:
Defendants in their counterclaim invoke their right of legal
redemption under Article 1623 of the New Civil Code in view of the
alleged sale of the undivided portions of the lot in question by their
co-heirs and co-owners as claimed by the plaintiffs in their
complaint. They have been informed by the plaintiff about said
sales upon the filing of the complaint in the instant case as far
back as March 14, 1973. Defendant themselves presented as
their very own exhibits copies of the respective deeds of sale or
conveyance by their said co-heirs and co-owners in favor of the
plaintiffs or their predecessors-in-interest way back on January 2,
1992 when they formally offered their exhibits in the instant case;
meaning, they themselves acquired possession of said
documentary exhibits even before they formally offered them in
evidence. Under Art. 1623 of the New Civil Code, defendants
have only THIRTY (30) DAYS counted from their actual knowledge
of the exact terms and conditions of the deeds of sale or
conveyance of their co-heirs' and co-owners' share within which to
exercise their right of legal redemption.24
Within the reglementary period, both parties filed their respective
notices of appeal before the trial court with petitioner and her
children taking exception to the finding of the trial court that the
period within which they could invoke their right of redemption had
already lapsed.25 For her part, private respondent raised as errors
the trial court's ruling that there was no contract of sale between
herself and Fortunato and the dismissal of their complaint for
specific performance.26
The Court of Appeals, in the decision now assailed before us,
reversed and set aside the trial court's dismissal of the private
respondent's complaint but upheld the portion of the court a
quo's decision ordering the dismissal of petitioner and her
children's counterclaim. The dispositive portion of the appellate
court's decision reads:
WHEREFORE, the decision dated March 11, 1994, is
hereby REVERSED and SET ASIDE insofar as the
dismissal of plaintiffs-appellants' complaint is concerned,
and another one is entered ordering the defendant-
appellant Fortunato Ape and/or his wife Perpetua de Ape
and successors-in-interest to execute in favor of plaintiff-
appellant Generosa Cawit de Lumayno a Deed of
Absolute Sale involving the one-eleventh (1/11) share or
participation of Fortunato Ape in Lot No. 2319, Escalante
Cadastre, containing an area of 12,527.19 square
meters, more or less, within (30) days from finality of this
decision, and in case of non-compliance with this Order,
that the Clerk of Court of said court is ordered to execute
the deed on behalf of the vendor. The decision is
AFFIRMED insofar as the dismissal of defendants-
appellants' counterclaim is concerned.
Without pronouncement as to costs.27
The Court of Appeals upheld private respondent's position that
Exhibit "G" had all the earmarks of a valid contract of sale, thus:
Exhibit G is the best proof that the P5,000.00 representing the
purchase price of the 1/11th share of Fortunato Ape was not paid by
the vendee on April 11, 1971, and/or up to the present, but that
does not affect the binding force and effect of the document. The
vendee having paid the vendor an advance payment of the agreed
purchase price of the property, what the vendor can exact from the
vendee is full payment upon his execution of the final deed of
sale. As is shown, the vendee precisely instituted this action to
compel the vendor Fortunato Ape to execute the final document,
after she was informed that he would execute the same upon
arrival of his daughter "Bala" from Mindanao, but afterwards failed
to live up to his contractual obligation (TSN, pp. 11-13, June 10,
1992).
It is not right for the trial court to expect plaintiff-appellant to pay
the balance of the purchase price before the final deed is
executed, or for her to deposit the equivalent amount in court in
the form of consignation. Consignation comes into fore in the case
of a creditor to whom tender of payment has been made and
refuses without just cause to accept it (Arts. 1256 and 1252,
N.C.C.; Querino vs. Pelarca, 29 SCRA 1). As vendee, plaintiff-
appellant Generosa Cawit de Lumayno does not fall within the
purview of a debtor.
We, therefore, find and so hold that the trial court should have
found that exhibit G bears all the earmarks of a private deed of
sale which is valid, binding and enforceable between the parties,
and that as a consequence of the failure and refusal on the part of
the vendor Fortunato Ape to live up to his contractual obligation, he
and/or his heirs and successors-in-interest can be compelled to
execute in favor of, and to deliver to the vendee, plaintiff-appellant
Generosa Cawit de Lumayno a registerable deed of absolute sale
involving his one-eleventh (1/11th) share or participation in Lot No.
2319, Escalante Cadastre, containing an area of 12,527.19 square
meters, more or less, within 30 days from finality of this decision,
and, in case of non-compliance within said period, this Court
appoints the Clerk of Court of the trial court to execute on behalf of
the vendor the said document.28
The Court of Appeals, however, affirmed the trial court's ruling on
the issue of petitioner and her children's right of redemption. It
ruled that Fortunato's receipt of the Second Owner's Duplicate of
OCT (RP) 1379 (RP-154 ([300]), containing the adverse claim of
private respondent and her husband, constituted a sufficient
compliance with the written notice requirement of Article 1623 of
the Civil Code and the period of redemption under this provision
had long lapsed.
Aggrieved by the decision of the appellate court, petitioner is now
before us raising, essentially, the following issues: whether
Fortunato was furnished with a written notice of sale of the shares
of his co-owners as required by Article 1623 of the Civil Code; and
whether the receipt signed by Fortunato proves the existence of a
contract of sale between him and private respondent.
In her memorandum, petitioner claimed that the Court of Appeals
erred in sustaining the court a quo's pronouncement that she could
no longer redeem the portion of Lot No. 2319 already acquired by
private respondent for no written notice of said sales was furnished
them. According to her, the Court of Appeals unduly expanded the
scope of the law by equating Fortunato's receipt of Second
Owner's Duplicate of OCT (RP) 1379 (RP-154 ([300]) with the
written notice requirement of Article 1623. In addition, she argued
that Exhibit "G" could not possibly be a contract of sale of
Fortunato's share in Lot No. 2319 as said document does not
contain "(a) definite agreement on the manner of payment of the
price."29 Even assuming that Exhibit "G" is, indeed, a contract of
sale between private respondent and Fortunato, the latter did not
have the obligation to deliver to private respondent a registrable
deed of sale in view of private respondent's own failure to pay the
full purchase price of Fortunato's portion of Lot No. 2319.
Petitioner is also of the view that, at most, Exhibit "G" merely
contained a unilateral promise to sell which private respondent
could not enforce in the absence of a consideration distinct from
the purchase price of the land. Further, petitioner reiterated her
claim that due to the illiteracy of her husband, it was incumbent
upon private respondent to show that the contents of Exhibit "G"
were fully explained to him. Finally, petitioner pointed out that the
Court of Appeals erred when it took into consideration the same
exhibit despite the fact that only its photocopy was presented
before the court.
On the other hand, private respondent argued that the annotation
on the second owner's certificate over Lot No. 2319 constituted
constructive notice to the whole world of private respondent's claim
over the majority of said parcel of land. Relying on our decision in
the case of Cabrera v. Villanueva,30 private respondent insisted
that when Fortunato received a copy of the second owner's
certificate, he became fully aware of the contracts of sale entered
into between his co-owners on one hand and private respondent
and her deceased husband on the other.
Private respondent also averred that "although (Lot No. 2319) was
not actually partitioned in a survey after the death of Cleopas Ape,
the land was partitioned in a 'hantal-hantal' manner by the heirs.
Each took and possessed specific portion or premises as his/her
share in land, farmed their respective portion or premises, and
improved them, each heir limiting his/her improvement within the
portion or premises which were his/her respective share."31 Thus,
when private respondent and her husband purchased the other
parts of Lot No. 2319, it was no longer undivided as petitioner
claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised
except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The
deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
Despite the plain language of the law, this Court has, over the
years, been tasked to interpret the "written notice requirement" of
the above-quoted provision. In the case Butte v. Manuel Uy &
Sons, Inc.,32 we declared that
In considering whether or not the offer to redeem was timely, we
think that the notice given by the vendee (buyer) should not be
taken into account. The text of Article 1623 clearly and expressly
prescribes that the thirty days for making the redemption are to be
counted from notice in writing by the vendor. Under the old law
(Civ. Code of 1889, Art. 1524), it was immaterial who gave the
notice; so long as the redeeming co-owner learned of the
alienation in favor of the stranger, the redemption period began to
run. It is thus apparent that the Philippine legislature in Article
1623 deliberately selected a particular method of giving notice, and
that method must be deemed exclusive. (39 Am. Jur., 237; Payne
vs. State, 12 S.W. 2(d) 528). As ruled in Wampler vs. Lecompte,
150 Atl. 458 (affd. in 75 Law Ed. [U.S.] 275)
why these provisions were inserted in the statute we are
not informed, but we may assume until the contrary is
shown, that a state of facts in respect thereto existed,
which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the
seller, and not by the buyer, are easily divined. The seller of an
undivided interest is in the best position to know who are his co-
owners that under the law must be notified of the sale. Also, the
notice by the seller removes all doubts as to fact of the sale, its
perfection; and its validity, the notice being a reaffirmation thereof,
so that the party notified need not entertain doubt that the seller
may still contest the alienation. This assurance would not exist if
the notice should be given by the buyer.33
The interpretation was somehow modified in the case of De
Conejero, et al. v. Court of Appeals, et al.34 wherein it was pointed
out that Article 1623 "does not prescribe a particular form of notice,
nor any distinctive method for notifying the redemptioner" thus, as
long as the redemptioner was notified in writing of the sale and the
particulars thereof, the redemption period starts to run. This view
was reiterated in Etcuban v. The Honorable Court of Appeals, et
al.,35 Cabrera v. Villanueva,36 Garcia, et al. v. Calaliman, et
al.,37 Distrito, et al. v. The Honorable Court of Appeals, et al.,38 and
Mariano, et al. v. Hon. Court of Appeals, et al.39
However, in the case of Salatandol v. Retes,40 wherein the plaintiffs
were not furnished any written notice of sale or a copy thereof by
the vendor, this Court again referred to the principle enunciated in
the case of Butte. As observed by Justice Vicente Mendoza, such
reversion is only sound, thus:
Art. 1623 of the Civil Code is clear in requiring that the written
notification should come from the vendor or prospective vendor,
not from any other person. There is, therefore, no room for
construction. Indeed, the principal difference between Art. 1524 of
the former Civil Code and Art. 1623 of the present one is that the
former did not specify who must give the notice, whereas the
present one expressly says the notice must be given by the
vendor. Effect must be given to this change in statutory
language.41
In this case, the records are bereft of any indication that Fortunato
was given any written notice of prospective or consummated sale
of the portions of Lot No. 2319 by the vendors or would-be
vendors. The thirty (30)-day redemption period under the law,
therefore, has not commenced to run.
Despite this, however, we still rule that petitioner could no longer
invoke her right to redeem from private respondent for the exercise
of this right "presupposes the existence of a co-ownership at the
time the conveyance is made by a co-owner and when it is
demanded by the other co-owner or co-owners."42 The regime of
co-ownership exists when ownership of an undivided thing or right
belongs to different persons.43 By the nature of a co-ownership, a
co-owner cannot point to specific portion of the property owned in
common as his own because his share therein remains
intangible.44 As legal redemption is intended to minimize co-
ownership,45 once the property is subdivided and distributed
among the co-owners, the community ceases to exist and there is
no more reason to sustain any right of legal redemption.46
In this case, records reveal that although Lot No. 2319 has not yet
been formally subdivided, still, the particular portions belonging to
the heirs of Cleopas Ape had already been ascertained and they in
fact took possession of their respective parts. This can be
deduced from the testimony of petitioner herself, thus:
Q When the plaintiffs leased the share of your
husband, were there any metes and bounds?
A It was not formally subdivided. We have only a
definite portion. (hantal-hantal)
Q This hantal-hantal of your husband, was it also
separate and distinct from the hantal-hantal or the share
of the brothers and sisters of your husband?
A Well, this property in question is a common
property.
Q To the north, whose share was that which is
adjacent to your husband's assumed partition?
A I do not know what [does] this "north" [mean].
COURT
 (To Witness)
Q To the place from where the sun rises, whose
share was that?
A The shares of Cornelia, Loreta, Encarnacion and
Adela.
Q How could you determine their own shares?
A They were residing in their respective assumed
portions.
Q How about determining their respective
boundaries?
A It could be determined by stakes and partly a row
of banana plantations planted by my son-in-law.
Q Who is this son-in-law you mentioned?
A Narciso Ape.
ATTY. CAWIT
(Continuing)
Q You said that there were stakes to determine the
hantal-hantal of your husband and the hantal-hantal of
the other heirs, did I get you right?
ATTY. TAN
Admitted, Your Honor.
ATTY. CAWIT
Q Mrs. Ape, in 1960, Cleopas Ape was already
dead, is that correct?
A Certainly, since he died in 1950.
Q By the manifestation of your counsel that the
entire land (13 hectares) of your father-in-law, Cleopas
Ape, was leased to Generosa Lumayno, is this correct?
A No, it is only the assumed portion of my husband
[which] was leased to Generosa Lumayno.
Q For clarification, it was only the share of your
husband [which] was leased to Generosa Cawit
Lumayno?
A Yes.47
ATTY. CAWIT
Q My question: is that portion which you said was
leased by your husband to the Lumayno[s] and which
was included to the lease by your mother-in-law to the
Lumayno[s], when the Lumayno[s] returned your
husband['s] share, was that the same premises that your
husband leased to the Lumayno[s]?
A The same.
Q In re-possessing this portion of the land
corresponding to the share of your husband, did your
husband demand that they should re-possess the land
from the Lumayno[s] or did the Lumayno[s] return them
to your husband voluntarily?
A They just returned to us without paying the
rentals.
COURT
Q Was the return the result of your husband's
request or just voluntarily they returned it to your
husband?
A No, sir, it was just returned voluntarily, and they
abandoned the area but my husband continued
farming.48
Similarly telling of the partition is the stipulation of the parties
during the pre-trial wherein it was admitted that Lot No. 2319 had
not been subdivided nevertheless, "Fortunato Ape had possessed
a specific portion of the land ostensibly corresponding to his
share."49
From the foregoing, it is evident that the partition of Lot No. 2319
had already been effected by the heirs of Cleopas Ape. Although
the partition might have been informal is of no moment for even an
oral agreement of partition is valid and binding upon the
parties.50 Likewise, the fact that the respective shares of Cleopas
Ape's heirs are still embraced in one and the same certificate of
title and have not been technically apportioned does not make said
portions less determinable and identifiable from one another nor
does it, in any way, diminish the dominion of their respective
owners.51
Turning now to the second issue of the existence of a contract of
sale, we rule that the records of this case betray the stance of
private respondent that Fortunato Ape entered into such an
agreement with her.
A contract of sale is a consensual contract, thus, it is perfected by
mere consent of the parties. It is born from the moment there is a
meeting of minds upon the thing which is the object of the sale and
upon the price.52 Upon its perfection, the parties may reciprocally
demand performance, that is, the vendee may compel the transfer
of the ownership and to deliver the object of the sale while the
vendor may demand the vendee to pay the thing sold.53For there
to be a perfected contract of sale, however, the following elements
must be present: consent, object, and price in money or its
equivalent. In the case of Leonardo v. Court of Appeals, et
al.,54 we explained the element of consent, to wit:
The essence of consent is the agreement of the parties on the
terms of the contract, the acceptance by one of the offer made by
the other. It is the concurrence of the minds of the parties on the
object and the cause which constitutes the contract. The area of
agreement must extend to all points that the parties deem material
or there is no consent at all.
To be valid, consent must meet the following requisites: (a) it
should be intelligent, or with an exact notion of the matter to which
it refers; (b) it should be free and (c) it should be spontaneous.
Intelligence in consent is vitiated by error; freedom by violence,
intimidation or undue influence; spontaneity by fraud.55
In this jurisdiction, the general rule is that he who alleges fraud or
mistake in a transaction must substantiate his allegation as the
presumption is that a person takes ordinary care for his concerns
and that private dealings have been entered into fairly and
regularly.56 The exception to this rule is provided for under Article
1332 of the Civil Code which provides that "[w]hen one of the
parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been
fully explained to the former."
In this case, as private respondent is the one seeking to enforce
the claimed contract of sale, she bears the burden of proving that
the terms of the agreement were fully explained to Fortunato Ape
who was an illiterate. This she failed to do. While she claimed in
her testimony that the contents of the receipt were made clear to
Fortunato, such allegation was debunked by Andres Flores himself
when the latter took the witness stand. According to Flores:
ATTY. TAN
Q Mr. Witness, that receipt is in English, is it not?
A Yes, sir.
Q When you prepared that receipt, were you aware
that Fortunato Ape doesn't know how to read and write
English?
A Yes, sir, I know.
Q Mr. Witness, you said you were present at the
time of the signing of that alleged receipt of P30.00,
correct?
A Yes, sir.
Q Where, in what place was this receipt signed?
A At the store.
Q At the time of the signing of this receipt, were
there other person[s] present aside from you, your
mother-in-law and Fortunato Ape?
A In the store, yes, sir.
Q When you signed that document of course you
acted as witness upon request of your mother-in-law?
A No, this portion, I was the one who prepared that
document.
Q Without asking of (sic) your mother-in-law, you
prepared that document or it was your mother-in-law who
requested you to prepare that document and acted as
witness?
A She requested me to prepare but does not
instructed (sic) me to act as witness. It was our opinion
that whenever I prepared the document, I signed it as a
witness.
Q Did it not occur to you to ask other witness to act
on the side of Fortunato Ape who did not know how to
read and write English?
A It occurred to me.
Q But you did not bother to request a person who is
not related to your mother-in-law, considering that
Fortunato Ape did not know how to read and write
English?
A The one who represented Fortunato Ape doesn't
know also how to read and write English. One a maid.
Q You mentioned that there [was another] person
inside the store, under your previous statement, when
the document was signed, there [was another] person in
the store aside from you, your mother-in-law and
Fortunato Ape, is not true?
A That is true, there is one person, but that person
doesn't know how to read also.
Q Of course, Mr. Witness, since it occurred to you
that there was need for other witness to sign that
document for Fortunato Ape, is it not a fact that the
Municipal Building is very near your house?
A Quite (near).
Q But you could readily proceed to the Municipal
Building and request one who is knowledgeable in
English to act as witness?
A I think there is no need for that small receipt. So I
don't bother myself to go.
Q You did not consider that receipt very important
because you said that small receipt?
A Yes, I know.57
As can be gleaned from Flores's testimony, while he was very
much aware of Fortunato's inability to read and write in the English
language, he did not bother to fully explain to the latter the
substance of the receipt (Exhibit "G"). He even dismissed the idea
of asking somebody else to assist Fortunato considering that a
measly sum of thirty pesos was involved. Evidently, it did not
occur to Flores that the document he himself prepared pertains to
the transfer altogether of Fortunato's property to his mother-in-law.
It is precisely in situations such as this when the wisdom of Article
1332 of the Civil Code readily becomes apparent which is "to
protect a party to a contract disadvantaged by illiteracy, ignorance,
mental weakness or some other handicap."58
In sum, we hold that petitioner is no longer entitled to the right of
redemption under Article 1632 of the Civil Code as Lot No. 2319
had long been partitioned among its co-owners. This Court
likewise annuls the contract of sale between Fortunato and private
respondent on the ground of vitiated consent.
WHEREFORE, premises considered, the decision dated 25 March
1998 of the Court of Appeals is hereby REVERSED and SET
ASIDE and the decision dated 11 March 1994 of the Regional Trial
Court, Branch 58, San Carlos City, Negros Occidental, dismissing
both the complaint and the counterclaim, is hereby REINSTATED.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 148116 April 14, 2004
ANTONIO K. LITONJUA and AURELIO K. LITONJUA,
JR., petitioners,
vs.
MARY ANN GRACE FERNANDEZ, HEIRS OF PAZ TICZON
ELEOSIDA, represented by GREGORIO T. ELEOSIDA, HEIRS
OF DOMINGO B. TICZON, represented by MARY MEDIATRIX T.
FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R.
TICZON, ERLINDA T. BENITEZ, DOMINIC TICZON, JOSEFINA
LUISA PIAMONTE, JOHN DOES and JANE DOES, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the
Court of Appeals in CA-G.R. CV No. 64940, which reversed and
set aside the June 23, 1999 Decision2 of the Regional Trial Court
of Pasig City, Branch 68, in Civil Case No. 65629, as well as its
Resolution dated April 30, 2001 denying the petitioners motion for
reconsideration of the aforesaid decision.
The heirs of Domingo B. Ticzon3 are the owners of a parcel of land
located in San Pablo City, covered by Transfer Certificate of Title
(TCT) No. T-36766 of the Register of Deeds of San Pablo City.4 On
the other hand, the heirs of Paz Ticzon Eleosida, represented by
Gregorio T. Eleosida, are the owners of a parcel of land located in
San Pablo City, covered by TCT No. 36754, also of the Register of
Deeds of San Pablo City.5
The Case for the Petitioners
Sometime in September 1995, Mrs. Lourdes Alimario and Agapito
Fisico who worked as brokers, offered to sell to the petitioners,
Antonio K. Litonjua and Aurelio K. Litonjua, Jr., the parcels of land
covered by TCT Nos. 36754 and 36766. The petitioners were
shown a locator plan and copies of the titles showing that the
owners of the properties were represented by Mary Mediatrix
Fernandez and Gregorio T. Eleosida, respectively. The brokers told
the petitioners that they were authorized by respondent Fernandez
to offer the property for sale. The petitioners, thereafter, made two
ocular inspections of the property, in the course of which they saw
some people gathering coconuts.
In the afternoon of November 27, 1995, the petitioners met with
respondent Fernandez and the two brokers at the petitioners office
in Mandaluyong City.6 The petitioners and respondent Fernandez
agreed that the petitioners would buy the property consisting of
36,742 square meters, for the price of P150 per square meter, or
the total sum of P5,098,500. They also agreed that the owners
would shoulder the capital gains tax, transfer tax and the expenses
for the documentation of the sale. The petitioners and respondent
Fernandez also agreed to meet on December 8, 1995 to finalize
the sale. It was also agreed upon that on the said date, respondent
Fernandez would present a special power of attorney executed by
the owners of the property, authorizing her to sell the property for
and in their behalf, and to execute a deed of absolute sale thereon.
The petitioners would also remit the purchase price to the owners,
through respondent Fernandez. However, only Agapito Fisico
attended the meeting. He informed the petitioners that respondent
Fernandez was encountering some problems with the tenants and
was trying to work out a settlement with them.7 After a few weeks
of waiting, the petitioners wrote respondent Fernandez on January
5, 1995, demanding that their transaction be finalized by January
30, 1996.8
When the petitioners received no response from respondent
Fernandez, the petitioners sent her another Letter9dated February
1, 1996, asking that the Deed of Absolute Sale covering the
property be executed in accordance with their verbal agreement
dated November 27, 1995. The petitioners also demanded the
turnover of the subject properties to them within fifteen days from
receipt of the said letter; otherwise, they would have no option but
to protect their interest through legal means.
Upon receipt of the above letter, respondent Fernandez wrote the
petitioners on February 14, 199610 and clarified her stand on the
matter in this wise:
1) It is not true I agreed to shoulder registration fees and
other miscellaneous expenses, etc. I do not recall we
ever discussed about them. Nonetheless, I made an
assurance at that time that there was no
liens/encumbrances and tenants on my property (TCT
36755).
2) It is not true that we agreed to meet on December 8,
1995 in order to sign the Deed of Absolute Sale. The
truth of the matter is that you were the one who
emphatically stated that you would prepare a Contract to
Sell and requested us to come back first week of
December as you would be leaving the country then. In
fact, what you were demanding from us was to apprise
you of the status of the property, whether we would be
able to ascertain that there are really no tenants. Ms.
Alimario and I left your office, but we did not assure you
that we would be back on the first week of December.
Unfortunately, some people suddenly appeared and
claiming to be "tenants" for the entire properties
(including those belonging to my other relatives.) Another
thing, the Barangay Captain now refuses to give a
certification that our properties are not tenanted.
Thereafter, I informed my broker, Ms. Lulu Alimario, to
relay to Mr. Agapito that due to the appearance of
"alleged tenants" who are demanding for a one-hectare
share, my cousin and I have thereby changed our mind
and that the sale will no longer push through. I
specifically instructed her to inform you thru your broker
that we will not be attending the meeting to be held
sometime first week of December.
In view thereof, I regret to formally inform you now that
we are no longer selling the property until all problems
are fully settled. We have not demanded and received
from you any earnest money, thereby, no obligations
exist. In the meantime, we hope that in the future we will
eventually be able to transact business since we still
have other properties in San Pablo City.11
Appended thereto was a copy of respondent Fernandez letter to
the petitioners dated January 16, 1996, in response to the latters
January 5, 1996 letter.12
On April 12, 1996, the petitioners filed the instant Complaint for
specific performance with damages13 against respondent
Fernandez and the registered owners of the property. In their
complaint, the petitioners alleged, inter alia, the following:
4. On 27 November 1995, defendants offered to sell to
plaintiffs two (2) parcels of land covered by Transfer
Certificates of Title Nos. 36766 and 36754 measuring a
total of 36,742 square meters in Barrio Concepcion, San
Pablo City. After a brief negotiation, defendants
committed and specifically agreed to sell to plaintiffs
33,990 square meters of the two (2) aforementioned
parcels of land at P150.00 per square meter.
5. The parties also unequivocally agreed to the following:
(a) The transfer tax and all the other fees and expenses
for the titling of the subject property in plaintiffs names
would be for defendants account.
(b) The plaintiffs would pay the entire purchase price of
P5,098,500.00 for the aforementioned 33,990 square
meters of land in plaintiffs office on 8 December 1995.
6. Defendants repeatedly assured plaintiffs that the two
(2) subject parcels of land were free from all liens and
encumbrances and that no squatters or tenants occupied
them.
7. Plaintiffs, true to their word, and relying in good faith
on the commitment of defendants, pursued the purchase
of the subject parcels of lands. On 5 January 1996,
plaintiffs sent a letter of even date to defendants,
setting the date of sale and payment on 30 January
1996.
7.1 Defendants received the letter on 12
January 1996 but did not reply to it.
8. On 1 February 1996, plaintiffs again sent a letter of
even date to defendants demanding execution of the
Deed of Sale.
8.1 Defendants received the same on 6
February 1996. Again, there was no reply.
Defendants thus reneged on their commitment
a second time.
9. On 14 February 1996, defendant Fernandez sent a
written communication of the same date to plaintiffs
enclosing therein a copy of her 16 January 1996 letter to
plaintiffs which plaintiffs never received before.
Defendant Fernandez stated in her 16 January 1996
letter that despite the meeting of minds among the
parties over the 33,990 square meters of land for
P150.00 per square meter on 27 November 1995,
defendants suddenly had a change of heart and no
longer wished to sell the same. Paragraph 6 thereof
unquestionably shows defendants previous agreement
as above-mentioned and their unjustified breach of their
obligations under it.
10. Defendants cannot unilaterally, whimsically and
capriciously cancel a perfected contract to sell.
11. Plaintiffs intended to use the subject property for their
subdivision project to support plaintiffs quarry operations,
processing of aggregate products and manufacture of
construction materials. Consequently, by reason of
defendants failure to honor their just obligations, plaintiffs
suffered, and continue to suffer, actual damages,
consisting in unrealized profits and cost of money, in the
amount of at least P5 Million.
 12. Plaintiffs also suffered sleepless nights and mental
anxiety on account of defendants fraudulent actuations
for which reason defendants are liable to plaintiffs for
moral damages in the amount of at least P1.5 Million.
13. By reason of defendants above-described fraudulent
actuations, plaintiffs, despite their willingness and ability
to pay the agreed purchase price, have to date been
unable to take delivery of the title to the subject property.
Defendants acted in a wanton, fraudulent and malevolent
manner in violating the contract to sell. By way of
example or correction for the public good, defendants are
liable to plaintiff for exemplary damages in the amount of
P500,000.00.
14. Defendants bad faith and refusal to honor their just
obligations to plaintiffs constrained the latter to litigate
and to engage the services of undersigned counsel for a
fee in the amount of at least P250,000.00.14
The petitioners prayed that, after due hearing, judgment be
rendered in their favor ordering the respondents to
(a) Secure at defendants expense all clearances from
the appropriate government agencies that will enable
defendants to comply with their obligations under the
Contract to Sell;
(b) Execute a Contract to Sell with terms agreed upon by
the parties;
(c) Solidarily pay the plaintiffs the following amounts:
1. P5,000,000.00 in actual damages;
2. P1,500,000.00 in moral damages;
3. P500,000.00 in exemplary damages;
4. P250,000.00 in attorneys fees.15
On July 5, 1996, respondent Fernandez filed her Answer to the
complaint.16 She claimed that while the petitioners offered to buy
the property during the meeting of November 27, 1995, she did not
accept the offer; thus, no verbal contract to sell was ever
perfected. She specifically alleged that the said contract to sell was
unenforceable for failure to comply with the statute of frauds. She
also maintained that even assuming arguendothat she had,
indeed, made a commitment or promise to sell the property to the
petitioners, the same was not binding upon her in the absence of
any consideration distinct and separate from the price. She, thus,
prayed that judgment be rendered as follows:
1. Dismissing the Complaint, with costs against the
plaintiffs;
2. On the COUNTERCLAIM, ordering plaintiffs to pay
defendant moral damages in the amount of not less than
P2,000,000.00 and exemplary damages in the amount of
not less than P500,000.00 and attorneys fees and
reimbursement expenses of litigation in the amount of
P300,000.00.17
On September 24, 1997, the trial court, upon motion of the
petitioners, declared the other respondents in default for failure to
file their responsive pleading within the reglementary period.18 At
the pre-trial conference held on March 2, 1998, the parties agreed
that the following issues were to be resolved by the trial court: (1)
whether or not there was a perfected contract to sell; (2) in the
event that there was, indeed, a perfected contract to sell, whether
or not the respondents breached the said contract to sell; and (3)
the corollary issue of damages.19
Respondent Fernandez testified that she requested Lourdes
Alimario to look for a buyer of the properties in San Pablo City "on
a best offer basis." She was later informed by Alimario that the
petitioners were interested to buy the properties. On November 27,
1995, along with Alimario and another person, she met with the
petitioners in the latters office and told them that she was at the
conference merely to hear their offer, that she could not bind the
owners of the properties as she had no written authority to sell the
same. The petitioners offered to buy the property at P150 per
square meter. After the meeting, respondent Fernandez requested
Joy Marquez to secure a barangay clearance stating that the
property was free of any tenants. She was surprised to learn that
the clearance could not be secured. She contacted a cousin of
hers, also one of the owners of the property, and informed him that
there was a prospective buyer of the property but that there were
tenants thereon. Her cousin told her that he was not selling his
share of the property and that he was not agreeable to the price of
P150 per square meter. She no longer informed the other owners
of the petitioners offer. Respondent Fernandez then asked
Alimario to apprise the petitioners of the foregoing developments,
through their agent, Agapito Fisico. She was surprised to receive a
letter from the petitioners dated January 5, 1996. Nonetheless, she
informed the petitioners that she had changed her mind in
pursuing the negotiations in a Letter dated January 18, 1996.
When she received petitioners February 1, 1996 Letter, she sent a
Reply-Letter dated February 14, 1996.
After trial on the merits, the trial court rendered judgment in favor
of the petitioners on June 23, 1999,20 the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, the Court hereby
renders judgment in favor of plaintiffs ANTONIO K.
LITONJUA and AURELIO K. LITONJUA and against
defendants MARY MEDIATRIX T. FERNANDEZ, HEIRS
OF PAZ TICZON ELEOSIDA, represented by
GREGORIO T. ELEOSIDA, JOHN DOES and JANE
DOES; HEIRS OF DOMINGO B. TICZON, represented
by MARY MEDIATRIX T. FERNANDEZ, CRISTETA
TICZON, EVANGELINE JILL R. TICZON, ERLINDA T.
BENITEZ, DOMINIC TICZON, JOSEFINA LUISA
PIAMONTE, JOHN DOES and JANE DOES, ordering
defendants to:
1. execute a Contract of Sale and/or Absolute
Deed of Sale with the terms agreed upon by the
parties and to secure all clearances from the
concerned government agencies and removal
of any tenants from the subject property at their
expense to enable defendants to comply with
their obligations under the perfected agreement
to sell; and
2. pay to plaintiffs the sum of Two Hundred
Thousand (P200,000.00) Pesos as and by way
of attorneys fees.21
On appeal to the Court of Appeals, the respondents ascribed the
following errors to the court a quo:
I. THE LOWER COURT ERRED IN HOLDING THAT
THERE WAS A PERFECTED CONTRACT OF SALE OF
THE TWO LOTS ON NOVEMBER 27, 1995.
II. THE LOWER COURT ERRED IN NOT HOLDING
THAT THE VERBAL CONTRACT OF SALE AS
CLAIMED BY PLAINTIFFS-APPELLEES ANTONIO
LITONJUA AND AURELIO LITONJUA WAS
UNENFORCEABLE.
III. THE LOWER COURT ERRED IN HOLDING THAT
THE LETTER OF DEFENDANT-APPELLANT
FERNANDEZ DATED JANUARY 16, 1996 WAS A
CONFIRMATION OF THE PERFECTED SALE AND
CONSTITUTED AS WRITTEN EVIDENCE THEREOF.
IV. THE LOWER COURT ERRED IN NOT HOLDING
THAT A SPECIAL POWER OF ATTORNEY WAS
REQUIRED IN ORDER THAT DEFENDANT-
APPELLANT FERNANDEZ COULD NEGOTIATE THE
SALE ON BEHALF OF THE OTHER REGISTERED CO-
OWNERS OF THE TWO LOTS.
V. THE LOWER COURT ERRED IN AWARDING
ATTORNEYS FEES IN THE DISPOSITIVE PORTION
OF THE DECISION WITHOUT STATING THE BASIS IN
THE TEXT OF SAID DECISION.22
On February 28, 2001, the appellate court promulgated its decision
reversing and setting aside the judgment of the trial court and
dismissing the petitioners complaint, as well as the respondents
counterclaim.23 The appellate court ruled that the petitioners failed
to prove that a sale or a contract to sell over the property between
the petitioners and the private respondent had been perfected.
Hence, the instant petition for review on certiorari under Rule 45 of
the Revised Rules of Court.
The petitioners submit the following issues for the Courts
resolution:
A. WHETHER OR NOT THERE WAS A PERFECTED
CONTRACT OF SALE BETWEEN THE PARTIES.
B. WHETHER OR NOT THE CONTRACT FALLS
UNDER THE COVERAGE OF THE STATUTE OF
FRAUDS.
C. WHETHER OR NOT THE DEFENDANTS
DECLARED IN DEFAULT ARE BENEFITED BY THE
ASSAILED DECISION OF THE COURT OF APPEALS.24
The petition has no merit.
The general rule is that the Courts jurisdiction under Rule 45 of
the Rules of Court is limited to the review of errors of law
committed by the appellate court. As the findings of fact of the
appellate court are deemed continued, this Court is not duty-bound
to analyze and calibrate all over again the evidence adduced by
the parties in the court a quo.25 This rule, however, is not without
exceptions, such as where the factual findings of the Court of
Appeals and the trial court are conflicting or
contradictory.26 Indeed, in this case, the findings of the trial court
and its conclusion based on the said findings contradict those of
the appellate court. However, upon careful review of the records of
this case, we find no justification to grant the petition. We, thus,
affirm the decision of the appellate court.
On the first and second assignment of errors, the petitioners assert
that there was a perfected contract of sale between the petitioners
as buyers and the respondents-owners, through respondent
Fernandez, as sellers. The petitioners contend that the perfection
of the said contract is evidenced by the January 16, 1996 Letter of
respondent Fernandez.27 The pertinent portions of the said letter
are as follows:
[M]y cousin and I have thereby changed our
mind and that the sale will no longer push through. I
specifically instructed her to inform you thru your broker
that we will not be attending the meeting to be held
sometime first week of December.
In view thereof, I regret to formally inform you now that
we are no longer selling the property until all problems
are fully settled. We have not demanded and received
from you any earnest money, thereby, no obligations
exist28
The petitioners argue that the letter is a sufficient note or
memorandum of the perfected contract, thus, removing it from the
coverage of the statute of frauds. The letter specifically makes
reference to a sale which respondent Fernandez agreed to initially,
but which the latter withdrew because of the emergence of some
people who claimed to be tenants on both parcels of land.
According to the petitioners, the respondents-owners, in their
answer to the complaint, as well as respondent Fernandez when
she testified, admitted the authenticity and due execution of the
said letter. Besides, when the petitioner Antonio Litonjua testified
on the contract of sale entered into between themselves and the
respondents-owners, the latter did not object thereto.
Consequently, the respondents-owners thereby ratified the said
contract of sale. The petitioners thus contend that the appellate
courts declaration that there was no perfected contract of sale
between the petitioners and the respondents-owners is belied by
the evidence, the pleadings of the parties, and the law.
The petitioners contention is bereft of merit. In its decision, the
appellate court ruled that the Letter of respondent Fernandez
dated January 16, 1996 is hardly the note or memorandum
contemplated under Article 1403(2)(e) of the New Civil Code,
which reads:
Art. 1403. The following contracts are unenforceable,
unless they are ratified:
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or
secondary evidence of its contents:
(e) An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein.29
The appellate court based its ruling on the following disquisitions:
In the case at bar, the letter dated January 16, 1996 of
defendant-appellant can hardly be said to constitute the
note or memorandum evidencing the agreement of the
parties to enter into a contract of sale as it is very clear
that defendant-appellant as seller did not accept the
condition that she will be the one to pay the registration
fees and miscellaneous expenses and therein also
categorically denied she had already committed to
execute the deed of sale as claimed by the plaintiffs-
appellees. The letter, in fact, stated the reasons beyond
the control of the defendant-appellant, why the sale could
no longer push through because of the problem with
tenants. The trial court zeroed in on the statement of the
defendant-appellant that she and her cousin changed
their minds, thereby concluding that defendant-appellant
had unilaterally cancelled the sale or backed out of her
previous commitment. However, the tenor of the letter
actually reveals a consistent denial that there was any
such commitment on the part of defendant-appellant to
sell the subject lands to plaintiffs-appellees. When
defendant-appellant used the words "changed our mind,"
she was clearly referring to the decision to sell the
property at all (not necessarily to plaintiffs-appellees) and
not in selling the property to herein plaintiffs-appellees as
defendant-appellant had not yet made the final
decision to sell the property to said plaintiffs-appellees.
This conclusion is buttressed by the last paragraph of the
subject letter stating that "we are no longer selling the
property until all problems are fully settled." To read a
definite previous agreement for the sale of the property in
favor of plaintiffs-appellees into the contents of this letter
is to unduly restrict the freedom of the contracting parties
to negotiate and prejudice the right of every property
owner to secure the best possible offer and terms in such
sale transactions. We believe, therefore, that the trial
court committed a reversible error in finding that there
was a perfected contract of sale or contract to sell under
the foregoing circumstances. Hence, the defendant-
appellant may not be held liable in this action for specific
performance with damages.30
In Rosencor Development Corporation vs. Court of Appeals,31 the
term "statute of frauds" is descriptive of statutes which require
certain classes of contracts to be in writing. The statute does not
deprive the parties of the right to contract with respect to the
matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable. The purpose of the
statute is to prevent fraud and perjury in the enforcement of
obligations, depending for their existence on the unassisted
memory of witnesses, by requiring certain enumerated contracts
and transactions to be evidenced by a writing signed by the party
to be charged. The statute is satisfied or, as it is often stated, a
contract or bargain is taken within the statute by making and
executing a note or memorandum of the contract which is sufficient
to state the requirements of the statute.32The application of such
statute presupposes the existence of a perfected contract.
However, for a note or memorandum to satisfy the statute, it must
be complete in itself and cannot rest partly in writing and partly in
parol. The note or memorandum must contain the names of the
parties, the terms and conditions of the contract and a description
of the property sufficient to render it capable of
identification.33 Such note or memorandum must contain the
essential elements of the contract expressed with certainty that
may be ascertained from the note or memorandum itself, or some
other writing to which it refers or within which it is connected,
without resorting to parol evidence.34 To be binding on the persons
to be charged, such note or memorandum must be signed by the
said party or by his agent duly authorized in writing.35
In City of Cebu v. Heirs of Rubi,36 we held that the exchange of
written correspondence between the parties may constitute
sufficient writing to evidence the agreement for purposes of
complying with the statute of frauds.
In this case, we agree with the findings of the appellate court that
there was no perfected contract of sale between the respondents-
owners, as sellers, and the petitioners, as buyers.
There is no documentary evidence on record that the respondents-
owners specifically authorized respondent Fernandez to sell their
properties to another, including the petitioners. Article 1878 of the
New Civil Code provides that a special power of attorney is
necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration,37 or to create or convey real rights over
immovable property,38 or for any other act of strict dominion.39 Any
sale of real property by one purporting to be the agent of the
registered owner without any authority therefor in writing from the
said owner is null and void.40The declarations of the agent alone
are generally insufficient to establish the fact or extent of her
authority.41 In this case, the only evidence adduced by the
petitioners to prove that respondent Fernandez was authorized by
the respondents-owners is the testimony of petitioner Antonio
Litonjua that respondent Fernandez openly represented herself to
be the representative of the respondents-owners,42 and that she
promised to present to the petitioners on December 8, 1996 a
written authority to sell the properties.43 However, the petitioners
claim was belied by respondent Fernandez when she testified,
thus:
Q Madam Witness, what else did you tell to the plaintiffs?
A I told them that I was there representing myself as one
of the owners of the properties, and I was just there to
listen to his proposal because that time, we were just
looking for the best offer and I did not have yet any
written authorities from my brother and sisters and
relatives. I cannot agree on anything yet since it is just a
preliminary meeting, and so, I have to secure authorities
and relate the matters to my relatives, brother and
sisters, sir.
Q And what else was taken up?
A Mr. Antonio Litonjua told me that they will be leaving for
another country and he requested me to come back on
the first week of December and in the meantime, I should
make an assurance that there are no tenants in our
properties, sir.44
The petitioners cannot feign ignorance of respondent Fernandez
lack of authority to sell the properties for the respondents-owners.
It must be stressed that the petitioners are noted businessmen
who ought to be very familiar with the intricacies of business
transactions, such as the sale of real property.
The settled rule is that persons dealing with an assumed agent are
bound at their peril, and if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent
of authority, and in case either is controverted, the burden of proof
is upon them to prove it.45 In this case, respondent Fernandez
specifically denied that she was authorized by the respondents-
owners to sell the properties, both in her answer to the complaint
and when she testified. The Letter dated January 16, 1996 relied
upon by the petitioners was signed by respondent Fernandez
alone, without any authority from the respondents-owners. There is
no evidence on record that the respondents-owners ratified all the
actuations of respondent Fernandez in connection with her
dealings with the petitioners. As such, said letter is not binding on
the respondents as owners of the subject properties.
Contrary to the petitioners contention, the letter of January 16,
199646 is not a note or memorandum within the context of Article
1403(2) because it does not contain the following: (a) all the
essential terms and conditions of the sale of the properties; (b) an
accurate description of the property subject of the sale; and, (c) the
names of the respondents-owners of the properties. Furthermore,
the letter made reference to only one property, that covered by
TCT No. T-36755.
We note that the petitioners themselves were uncertain as to the
specific area of the properties they were seeking to buy. In their
complaint, they alleged to have agreed to buy from the
respondents-owners 33,990 square meters of the total acreage of
the two lots consisting of 36,742 square meters. In their Letter to
respondent Fernandez dated January 5, 1996, the petitioners
stated that they agreed to buy the two lots, with a total area of
36,742 square meters.47 However, in their Letter dated February 1,
1996, the petitioners declared that they agreed to buy a portion of
the properties consisting of 33,990 square meters.48 When he
testified, petitioner Antonio Litonjua declared that the petitioners
agreed to buy from the respondents-owners 36,742 square meters
at P150 per square meter or for the total price of P5,098,500. 49
The failure of respondent Fernandez to object to parol evidence to
prove (a) the essential terms and conditions of the contract
asserted by the petitioners and, (b) her authority to sell the
properties for the respondents-registered owners did not and
should not prejudice the respondents-owners who had been
declared in default.50
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The
decision of the appellate court is AFFIRMEDIN TOTO. Costs
against the petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 160488 September 3, 2004
FELOMINA1 ABELLANA, petitioner,
vs.
SPOUSES ROMEO PONCE and LUCILA PONCE and the
REGISTER OF DEEDS of BUTUAN CITY,respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari assailing the June 16,
2003 decision2 of the Court of Appeals in CA-G.R. CV No. 69213,
which reversed and set aside the August 28, 2000 decision 3 of the
Regional Trial Court of Butuan City, Branch 2, in Civil Case No.
4270.
The facts as testified to by petitioner Felomina Abellana are as
follows:
On July 15, 1981, Felomina, a spinster, pharmacist and aunt of
private respondent Lucila Ponce, purchased from the late Estela
Caldoza-Pacres a 44,2974 square meter agricultural lot5 with the
intention of giving said lot to her niece, Lucila. Thus, in the deed of
sale,6 the latter was designated as the buyer of Lot 3, Pcs-10-
000198, covered by Original Certificate of Title No. P-27,
Homestead Patent No. V-1551 and located at Los Angeles, Butuan
City.7The total consideration of the sale was P16,500.00, but only
P4,500.00 was stated in the deed upon the request of the seller.8
Subsequently, Felomina applied for the issuance of title in the
name of her niece. On April 28, 1992, Transfer Certificate of Title
(TCT) No. 28749 over the subject lot was issued in the name of
Lucila.10 Said title, however, remained in the possession of
Felomina who developed the lot through Juanario Torreon11 and
paid real property taxes thereon.12
The relationship between Felomina and respondent spouses
Romeo and Lucila Ponce, however, turned sour. The latter
allegedly became disrespectful and ungrateful to the point of
hurling her insults and even attempting to hurt her physically.
Hence, Felomina filed the instant case for revocation of implied
trust to recover legal title over the property.13
Private respondent spouses Lucila, also a pharmacist, and
Romeo, a marine engineer, on the other hand, claimed that the
purchase price of the lot was only P4,500.00 and that it was them
who paid the same. The payment and signing of the deed of sale
allegedly took place in the office of Atty. Teodoro Emboy in the
presence of the seller and her siblings namely, Aquilino Caldoza
and the late Lilia Caldoza.14
A year later, Juanario approached Lucila and volunteered to till the
lot, to which she agreed.15 In 1987, the spouses consented to
Felominas proposal to develop and lease the lot. They, however,
shouldered the real property taxes on the lot, which was paid
through Felomina. In 1990, the spouses demanded rental from
Felomina but she refused to pay because her agricultural
endeavor was allegedly not profitable.16
When Lucila learned that a certificate of title in her name had
already been issued, she confronted Felomina who claimed that
she already gave her the title. Thinking that she might have
misplaced the title, Lucila executed an affidavit of loss which led to
the issuance of another certificate of title in her name. 17
On August 28, 2000, the trial court rendered a decision holding
that an implied trust existed between Felomina and Lucila, such
that the latter is merely holding the lot for the benefit of the former.
It thus ordered the conveyance of the subject lot in favor of
Felomina. The dispositive portion thereof, reads:
IN VIEW OF THE FOREGOING, judgment is hereby
rendered declaring, directing and ordering that:
a) An implied trust was created with plaintiff as
trustor and private defendant Lucila A. Ponce
married to private defendant Engr. Romeo D.
Ponce as trustee pursuant to Article 1448 of the
New Civil Code;
b) The implied trust, having been created
without the consent of the trustee and without
any condition, is revoked;
c) The private defendants, who are spouses,
execute the necessary deed of conveyance in
favor of the plaintiff of the land, covered by and
embraced in TCT NO. T-2874, in controversy
and in the event private defendants refuse to
execute the deed of conveyance, the public
defendant City Register of Deeds of Butuan to
cancel TCT No. T-2874 and issue a new one in
lieu thereof in the name of the plaintiff;
d) The private defendants spouses to pay
jointly and severally plaintiff the sum of
PhP25,000.00 as attorneys fees and
PhP4,000.00 as expenses of litigation;
e) The dismissal of the counterclaim of private
defendants spouses[;] and
f) The private defendants to pay the costs.
SO ORDERED.18
Private respondent spouses appealed to the Court of Appeals
which set aside the decision of the trial court ruling that Felomina
failed to prove the existence of an implied trust and upheld
respondent spouses ownership over the litigated lot. The appellate
court further held that even assuming that Felomina paid the
purchase price of the lot, the situation falls within the exception
stated in Article 1448 of the Civil Code which raises a disputable
presumption that the property was purchased by Felomina as a gift
to Lucila whom she considered as her own daughter. The decretal
portion thereof, states
WHEREFORE, premises considered, the appealed
decision of the Regional Trial Court, Branch 2, Butuan
City, in Civil Case No. 4270, is hereby REVERSED AND
SET ASIDE. A new one is heretofore rendered dismissing
the complaint below of plaintiff-appellee, F[e]lomina
Abellana.
SO ORDERED.19
Felomina filed a motion for reconsideration but the same was
denied.20 Hence, the instant petition.
The issue before us is: Who, as between Felomina and
respondent spouses, is the lawful owner of the controverted lot? To
resolve this issue, it is necessary to determine who paid the
purchase price of the lot.
After a thorough examination of the records and transcript of
stenographic notes, we find that it was Felomina and not Lucila
who truly purchased the questioned lot from Estela. The positive
and consistent testimony of Felomina alone, that she was the real
vendee of the lot, is credible to debunk the contrary claim of
respondent spouses. Indeed, the lone testimony of a witness, if
credible, is sufficient as in the present case.21 Moreover, Aquilino
Caldoza, brother of the vendor and one of the witnesses22 to the
deed of sale, categorically declared that Felomina was the buyer
and the one who paid the purchase price to her sister, Estela.23
Then too, Juanario, who was allegedly hired by Lucila to develop
the lot, vehemently denied that he approached and convinced
Lucila to let him till the land. According to Juanario, he had never
spoken to Lucila about the lot and it was Felomina who recruited
him to be the caretaker of the litigated property.24
The fact that it was Felomina who bought the lot was further
bolstered by her possession of the following documents from the
time of their issuance up to the present, to wit: (1) the transfer
certificate of title25 and tax declaration in the name of Lucila;26 (2)
the receipts of real property taxes in the name of Felomina
Abellana for the years 1982-1984, 1992-1994 and 1995;27 and (3)
the survey plan of the lot.28
Having determined that it was Felomina who paid the purchase
price of the subject lot, the next question to resolve is the nature of
the transaction between her and Lucila.
It appears that Felomina, being of advanced age29 with no family of
her own, used to purchase properties and afterwards give them to
her nieces. In fact, aside from the lot she bought for Lucila (marked
as Exhibit "R-2"), she also purchased 2 lots, one from Aquilino
Caldoza (marked as Exhibit "R-1") and the other from Domiciano
Caldoza (marked as Exhibit "R-3"), which she gave to Zaida
Bascones (sister of Lucila), thus:
Q I am showing to you again Exhibit R, according to
you[,] you bought Exhibits R-1, R-2 and R-3, do you
remember that?
A Yes sir.
xxx xxx xxx
Q Aquilin[o] Caldoza conveyed this land in Exhibit R-1 to
you?
A Yes, sir.
Q Is this now titled in your name?
 A No. I was planning to give this land to my nieces. One
of which [was] already given to Mrs. [Lucila] Ponce.
Q I am talking only about this lot in Exhibit R-1[.]
A Not in my name.
Q In whose name was this lot in Exhibit R-1 now?
A In the name of Zaida Bascones.
Q Who prepared the deed of sale?
A At the start it was in the name of Rudy
[Torreon].30 Because Rudy [Torreon] knew that there is
some trouble already about that lot he made a deed of
sale to the name of Zaida Bascones, which I planned to
give that land to her (sic).
Q As regards Exhibit R-1, you bought it actually?
A Yes, sir.
Q But the original deed of sale was in the name of
Rudolfo [Torreon]?
A Yes, sir.
Q And later on Rudolfo [Torreon] again transferred it to
Zaida Bascones?
A Yes, sir.31
Likewise, in the case of Lucila, though it was Felomina who paid
for the lot, she had Lucila designated in the deed as the vendee
thereof and had the title of the lot issued in Lucilas name. It is
clear therefore that Felomina donated the land to Lucila. This is
evident from her declarations, viz:
Witness
A In 1981 there was a riceland offered so I told her that
I will buy that land and I will give to her later (sic),
because since 1981 up to 1992 Mrs. Lucila Ponce has no
job.
Q Where is the land located?
A In Los Angeles, Butuan City.
Q Who was the owner of this land?
A The owner of that land is Mrs. Estela Caldoza-Pacr[e]s.
The husband is Pacr[e]s.
xxx xxx xxx
Q What did you do with this land belonging to Mrs.
Estela-Caldoza- Pacr[e]s?
A I paid the lot, then worked the lot, since at the start of
my buying the lot until now (sic).
Q You said that you told Lucila Ponce that you would
give the land to her later on, what did you do in
connection with this intention of yours to give the
land to her?
A So I put the name of the title in her name in good
faith (sic).
Q You mean to tell the court that when you purchased
this land located at Los Angeles, Butuan City, the
instrument of sale or the deed of sale was in the name of
Lucila Ponce?
A Yes, sir.32
xxx xxx xxx
Q Did you not ask your adviser Rudolfo [Torreon]
whether it was wise for you to place the property in the
name of Lucila Ponce when you are the one who is the
owner?
A Because we have really the intention to give it to
her.33
Generally, contracts are obligatory in whatever form they may have
been entered into, provided all the essential requisites for their
validity are present. When, however, the law requires that a
contract be in some form in order that it may be valid, that
requirement is absolute and indispensable. Its non-observance
renders the contract void and of no effect.34 Thus, under Article 749
of the Civil Code
Article 749. In order that the donation of an immovable
property may be valid, it must be made in a public
document, specifying therein the property donated and
the value of the charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in
a separate public document, but it shall not take effect unless it is
done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall
be notified thereof in an authentic form, and this step shall be
noted in both instruments.
In the instant case, what transpired between Felomina and Lucila
was a donation of an immovable property which was not embodied
in a public instrument as required by the foregoing article. Being an
oral donation, the transaction was void.35 Moreover, even if
Felomina enjoyed the fruits of the land with the intention of giving
effect to the donation after her demise, the conveyance is still a
void donation mortis causa, for non-compliance with the formalities
of a will.36 No valid title passed regardless of the intention of
Felomina to donate the property to Lucila, because the naked
intent to convey without the required solemnities does not suffice
for gratuitous alienations, even as between the parties inter se.37 At
any rate, Felomina now seeks to recover title over the property
because of the alleged ingratitude of the respondent spouses.
Unlike ordinary contracts (which are perfected by the concurrence
of the requisites of consent, object and cause pursuant to Article
131838 of the Civil Code), solemn contracts like donations are
perfected only upon compliance with the legal formalities under
Articles 74839 and 749.40 Otherwise stated, absent the solemnity
requirements for validity, the mere intention of the parties does not
give rise to a contract. The oral donation in the case at bar is
therefore legally inexistent and an action for the declaration of the
inexistence of a contract does not prescribe. 41Hence, Felomina
can still recover title from Lucila.
Article 144842 of the Civil Code on implied trust finds no application
in the instant case. The concept of implied trusts is that from the
facts and circumstances of a given case, the existence of a trust
relationship is inferred in order to effect the presumed intention of
the parties.43 Thus, one of the recognized exceptions to the
establishment of an implied trust is where a contrary intention is
proved,44 as in the present case. From the testimony of Felomina
herself, she wanted to give the lot to Lucila as a gift. To her mind,
the execution of a deed with Lucila as the buyer and the
subsequent issuance of title in the latters name were the acts that
would effectuate her generosity. In so carrying out what she
conceived, Felomina evidently displayed her unequivocal intention (2) Ordering the Register of Deeds of Butuan City to
to transfer ownership of the lot to Lucila and not merely to cancel TCT No. T-2874 in the name of respondent Lucila
constitute her as a trustee thereof. It was only when their Ponce and to issue a new one in the name of petitioner
relationship soured that she sought to revoke the donation on the Felomina Abellana; and
theory of implied trust, though as previously discussed, there is
nothing to revoke because the donation was never perfected. (3) Deleting the awards of attorneys fees and litigation
expenses for lack of basis.
In declaring Lucila as the owner of the disputed lot, the Court of
Appeals applied, among others, the second sentence of Article No pronouncement as to costs.
1448 which states
SO ORDERED.
"x x x However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of
Republic of the Philippines
the child."
SUPREME COURT
Manila
Said presumption also arises where the property is given to a
person to whom the person paying the price stands in loco
THIRD DIVISION
parentis or as a substitute parent.45

G.R. No. 155208 March 27, 2007

The abovecited provision, however, is also not applicable here
because, first, it was not established that Felomina stood as a
substitute parent of Lucila; and second, even assuming that she NENA LAZALITA* TATING, Petitioner,
did, the donation is still void because the transfer and acceptance vs.
was not embodied in a public instrument. We note that said FELICIDAD TATING MARCELLA, represented by SALVADOR
provision merely raised a presumption that the conveyance was a MARCELLA, CARLOS TATING, and the COURT OF
gift but nothing therein exempts the parties from complying with APPEALS, Respondents.
the formalities of a donation. Dispensation of such solemnities
would give rise to anomalous situations where the formalities of a DECISION
donation and a will in donations inter vivos, and donations mortis
causa, respectively, would be done away with when the transfer of AUSTRIA-MARTINEZ, J.:
the property is made in favor of a child or one to whom the donor
stands inloco parentis. Such a scenario is clearly repugnant to the
Assailed in the Special Civil Action for Certiorari before the Court
mandatory nature of the law on donation.
are the Decision1 dated February 22, 2002 and the Resolution
dated August 22, 2002 of the Court of Appeals (CA) in CA-G.R. CV
While Felomina sought to recover the litigated lot on the ground of No. 64122, which affirmed the Decision2 of the Regional Trial Court
implied trust and not on the invalidity of donation, the Court is (RTC) of Cadiz City, Negros Occidental, Branch 60.
clothed with ample authority to address the latter issue in order to
arrive at a just decision that completely disposes of the
The present case arose from a controversy involving a parcel of
controversy.46 Since rules of procedure are mere tools designed to
land denominated as Lot 56 of Subdivision plan Psd-31182,
facilitate the attainment of justice, they must be applied in a way
located at Abelarde St., Cadiz City, Negros Occidental. The subject
that equitably and completely resolve the rights and obligations of
lot, containing an area of 200 square meters, was owned by
the parties.47
Daniela Solano Vda. de Tating (Daniela) as evidenced by Transfer
Certificate of Title (TCT) No. T-4393 issued by the Registry of
As to the trial courts award of attorneys fees and litigation Deeds of the City of Cadiz. 3
expenses, the same should be deleted for lack of basis. Aside from
the allegations in the complaint, no evidence was presented in
On October 14, 1969, Daniela sold the subject property to her
support of said claims. The trial court made these awards in the
granddaughter, herein petitioner Nena Lazalita Tating (Nena). The
dispositive portion of its decision without stating any justification
contract of sale was embodied in a duly notarized Deed of
therefor in theratio decidendi. Their deletion is therefore proper.48
Absolute Sale executed by Daniela in favor of
Nena.4 Subsequently, title over the subject property was
Finally, in deciding in favor of Felomina, the trial court ordered transferred in the name of Nena.5 She declared the property in her
respondent spouses to execute a deed of sale over the subject lot name for tax purposes and paid the real estate taxes due thereon
in favor of Felomina in order to effect the transfer of title to the for the years 1972, 1973, 1975 to 1986 and 1988.6 However, the
latter. The proper remedy, however, is provided under Section 10 land remained in possession of Daniela.
(a), Rule 39 of the Revised Rules of Civil Procedure which
provides that "x x x [i]f real or personal property is situated within
On December 28, 1977, Daniela executed a sworn statement
the Philippines, the court in lieu of directing a conveyance thereof
claiming that she had actually no intention of selling the property;
may by an order divest the title of any party and vest it in others,
the true agreement between her and Nena was simply to transfer
which shall have the force and effect of a conveyance executed in
title over the subject property in favor of the latter to enable her to
due form of law."
obtain a loan by mortgaging the subject property for the purpose of
helping her defray her business expenses; she later discovered
WHEREFORE, in view of all the foregoing, the petition that Nena did not secure any loan nor mortgage the property; she
is GRANTED and the June 16, 2003 decision of the Court of wants the title in the name of Nena cancelled and the subject
Appeals in CA-G.R. CV No. 69213 is REVERSED and SET property reconveyed to her.7
ASIDE. The August 28, 2000 decision of the Regional Trial Court
of Butuan City, Branch 2, in Civil Case No. 4270,
Daniela died on July 29, 19888 leaving her children as her heirs,
is REINSTATED with the followingMODIFICATIONS:
namely: Ricardo, Felicidad, Julio, Carlos and Cirilo who
predeceased Daniela and was represented by herein petitioner.
(1) Declaring petitioner Felomina Abellana as the
absolute owner of Lot 3, Pcs-10-000198;
In a letter dated March 1, 1989, Carlos informed Nena that when
Daniela died they discovered the sworn statement she executed
on December 28, 1977 and, as a consequence, they are
demanding from Nena the return of their rightful shares over the
subject property as heirs of Daniela.9 Nena did not reply. Efforts to
settle the case amicably proved futile.
Hence, on September 6, 1989, Carlos and Felicidad, represented
by her son Salvador, filed a complaint with the RTC of Cadiz City,
Negros Occidental against Nena praying for the nullification of the
Deed of Absolute Sale executed by Daniela in her favor,
cancellation of the TCT issued in the name of Nena, and issuance
of a new title and tax declaration in favor of the heirs of
Daniela.10 The complaint also prayed for the award of moral and
exemplary damages as well as attorneys fees and litigation
expenses. On March 19, 1993, the plaintiffs filed an amended
complaint with leave of court for the purpose of excluding Ricardo
as a party plaintiff, he having died intestate and without issue in
March 1991.11 He left Carlos, Felicidad, Julio, and Nena as his sole
heirs.
In her Answer, Nena denied that any fraud or misrepresentation
attended the execution of the subject Deed of Absolute Sale. She
also denied having received the letter of her uncle, Carlos. She
prayed for the dismissal of the complaint, and in her counterclaim,
she asked the trial court for the award of actual, exemplary and
moral damages as well as attorneys fees and litigation
expenses.12
Trial ensued. On November 4, 1998, the RTC rendered judgment
with the following dispositive portion:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered in favor of the plaintiffs and against the defendant, and
hereby declaring the document of sale dated October 14, 1969
(Exh. "Q") executed between Daniela Solano Vda. de Tating and
Nena Lazalita Tating as NULL and VOID and further ordering:
1. The Register of Deeds of Cadiz City to cancel TCT No.
5975 and in lieu thereof to issue a new title in the names
of Carlos Tating, Pro-indiviso owner of one-fourth ()
portion of the property; Felicidad Tating Marcella, Pro-
indiviso owner of one-fourth () portion; Julio Tating, Pro-
indiviso owner of one-fourth () portion and Nena
Lazalita Tating, Pro-indiviso owner of one-fourth ()
portion, all of lot 56 after payment of the prescribed fees;
2. The City Assessor of the City of Cadiz to cancel Tax
Declaration No. 143-00672 and in lieu thereof issue a
new Tax Declaration in the names of Carlos Tating,
Pro-indiviso portion; Felicidad Tating Marcella, Pro-
indiviso portion; Julio Tating, Pro-indiviso portion; and
Nena Lazalita Tating, Pro-indiviso portion, all of lot 56
as well as the house standing thereon be likewise
declared in the names of the persons mentioned in the
same proportions as above-stated after payment of the
prescribed fees;
3. The defendant is furthermore ordered to pay plaintiffs
the sum of P20,000.00 by way of moral
damages,P10,000.00 by way of exemplary
damages, P5,000.00 by way of attorneys fees
and P3,000.00 by way of litigation expenses; and to
4. Pay the costs of suit.
SO ORDERED.13
Nena filed an appeal with the CA. On February 22, 2002, the CA
rendered its Decision affirming the judgment of the RTC.14
Nenas Motion for Reconsideration was denied by the CA in its
Resolution dated August 22, 2002.15
Hence, herein petition for certiorari anchored on the ground that
the CA "has decided the instant case without due regard to and in
violation of the applicable laws and Decisions of this Honorable
Court and also because the Decision of the Regional Trial Court,
which it has affirmed, is not supported by and is even against the
evidence on record."16
At the outset, it must be stated that the filing of the instant petition
for certiorari under Rule 65 of the Rules of Court is inappropriate.
Considering that the assailed Decision and Resolution of the CA
finally disposed of the case, the proper remedy is a petition for
review under Rule 45 of the Rules of Court.
The Court notes that while the instant petition is denominated as a
Petition for Certiorari under Rule 65 of the Rules of Court, there is
no allegation that the CA committed grave abuse of discretion. On
the other hand, the petition actually avers errors of judgment,
rather than of jurisdiction, which are the proper subjects of a
petition for review on certiorari. Hence, in accordance with the
liberal spirit pervading the Rules of Court and in the interest of
justice, the Court decided to treat the present petition
for certiorari as having been filed under Rule 45, especially
considering that it was filed within the reglementary period for filing
the same.17
As to the merits of the case, petitioner contends that the case for
the private respondents rests on the proposition that the Deed of
Absolute Sale dated October 14, 1969 is simulated because
Danielas actual intention was not to dispose of her property but
simply to help petitioner by providing her with a collateral.
Petitioner asserts that the sole evidence which persuaded both the
RTC and the CA in holding that the subject deed was simulated
was the Sworn Statement of Daniela dated December 28, 1977.
However, petitioner argues that said Sworn Statement should have
been rejected outright by the lower courts considering that Daniela
has long been dead when the document was offered in evidence,
thereby denying petitioner the right to cross-examine her.
Petitioner also contends that while the subject deed was executed
on October 14, 1969, the Sworn Statement was purportedly
executed only on December 28, 1977 and was discovered only
after the death of Daniela in 1994.18 Petitioner argues that if the
deed of sale is indeed simulated, Daniela would have taken action
against the petitioner during her lifetime. However, the fact remains
that up to the time of her death or almost 20 years after the Deed
of Absolute Sale was executed, she never uttered a word of
complaint against petitioner.
Petitioner further asserts that the RTC and the CA erred in
departing from the doctrine held time and again by the Supreme
Court that clear, strong and convincing evidence beyond mere
preponderance is required to show the falsity or nullity of a notarial
document. Petitioner also argues that the RTC and the CA erred in
its pronouncement that the transaction between Daniela and
petitioner created a trust relationship between them because of the
settled rule that where the terms of a contract are clear, it should
be given full effect.
In their Comment and Memorandum, private respondents contend
that petitioner failed to show that the CA or the RTC committed
grave abuse of discretion in arriving at their assailed judgments;
that Danielas Sworn Statement is sufficient evidence to prove that
the contract of sale by and between her and petitioner was merely
simulated; and that, in effect, the agreement between petitioner
and Daniela created a trust relationship between them.
The Court finds for the petitioner.
The CA and the trial court ruled that the contract of sale between
petitioner and Daniela is simulated. A contract is simulated if the
parties do not intend to be bound at all (absolutely simulated) or if
the parties conceal their true agreement (relatively
simulated).19 The primary consideration in determining the true
nature of a contract is the intention of the parties. 20 Such intention
is determined from the express terms of their agreement as well as
from their contemporaneous and subsequent acts.21
In the present case, the main evidence presented by private
respondents in proving their allegation that the subject deed of
sale did not reflect the true intention of the parties thereto is the
sworn statement of Daniela dated December 28, 1977. The trial
court admitted the said sworn statement as part of private
respondents evidence and gave credence to it. The CA also
accorded great probative weight to this document.
There is no issue in the admissibility of the subject sworn
statement. However, the admissibility of evidence should not be
equated with weight of evidence.22 The admissibility of evidence
depends on its relevance and competence while the weight of
evidence pertains to evidence already admitted and its tendency to
convince and persuade.23 Thus, a particular item of evidence may
be admissible, but its evidentiary weight depends on judicial
evaluation within the guidelines provided by the rules of
evidence.24 It is settled that affidavits are classified as hearsay
evidence since they are not generally prepared by the affiant but
by another who uses his own language in writing the affiants
statements, which may thus be either omitted or misunderstood by
the one writing them.25Moreover, the adverse party is deprived of
the opportunity to cross-examine the affiant.26 For this reason,
affidavits are generally rejected for being hearsay, unless the
affiants themselves are placed on the witness stand to testify
thereon.27 The Court finds that both the trial court and the CA
committed error in giving the sworn statement probative weight.
Since Daniela is no longer available to take the witness stand as
she is already dead, the RTC and the CA should not have given
probative value on Danielas sworn statement for purposes of
proving that the contract of sale between her and petitioner was
simulated and that, as a consequence, a trust relationship was
created between them.
Private respondents should have presented other evidence to
sufficiently prove their allegation that Daniela, in fact, had no
intention of disposing of her property when she executed the
subject deed of sale in favor of petitioner. As in all civil cases, the
burden is on the plaintiff to prove the material allegations of his
complaint and he must rely on the strength of his evidence and not
on the weakness of the evidence of the defendant.28 Aside from
Danielas sworn statement, private respondents failed to present
any other documentary evidence to prove their claim. Even the
testimonies of their witnesses failed to establish that Daniela had a
different intention when she entered into a contract of sale with
petitioner.
In Suntay v. Court of Appeals,29 the Court ruled that the most
protuberant index of simulation is the complete absence, on the
part of the vendee, of any attempt in any manner to assert his
rights of ownership over the disputed property.30 In the present
case, however, the evidence clearly shows that petitioner declared
the property for taxation and paid realty taxes on it in her name.
Petitioner has shown that from 1972 to 1988 she religiously paid
the real estate taxes due on the said lot and that it was only in
1974 and 1987 that she failed to pay the taxes thereon. While tax
receipts and declarations and receipts and declarations of
ownership for taxation purposes are not, in themselves,
incontrovertible evidence of ownership, they constitute at least
proof that the holder has a claim of title over the property.31 The
voluntary declaration of a piece of property for taxation purposes
manifests not only ones sincere and honest desire to obtain title to
the property and announces his adverse claim against the State
and all other interested parties, but also the intention to contribute
needed revenues to the Government.32 Such an act strengthens
ones bona fide claim of acquisition of ownership.33 On the other
hand, private respondents failed to present even a single tax
receipt or declaration showing that Daniela paid taxes due on the
disputed lot as proof that she claims ownership thereof. The only
Tax Declaration in the name of Daniela, which private respondents
presented in evidence, refers only to the house standing on the lot
in controversy.34 Even the said Tax Declaration contains a notation
that herein petitioner owns the lot (Lot 56) upon which said house
was built.
Moreover, the Court agrees with petitioner that if the subject Deed
of Absolute Sale did not really reflect the real intention of Daniela,
why is it that she remained silent until her death; she never told
any of her relatives regarding her actual purpose in executing the
subject deed; she simply chose to make known her true intentions
through the sworn statement she executed on December 28, 1977,
the existence of which she kept secret from her relatives; and
despite her declaration therein that she is appealing for help in
order to get back the subject lot, she never took any concrete step
to recover the subject property from petitioner until her death more
than ten years later.
It is true that Daniela retained physical possession of the property
even after she executed the subject Absolute Deed of Sale and
even after title to the property was transferred in petitioners favor.
In fact, Daniela continued to occupy the property in dispute until
her death in 1988 while, in the meantime, petitioner continued to
reside in Manila. However, it is well-established that ownership and
possession are two entirely different legal concepts.35Just as
possession is not a definite proof of ownership, neither is non-
possession inconsistent with ownership. The first paragraph of
Article 1498 of the Civil Code states that when the sale is made
through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot
clearly be inferred. Possession, along with ownership, is
transferred to the vendee by virtue of the notarized deed of
conveyance.36 Thus, in light of the circumstances of the present
case, it is of no legal consequence that petitioner did not take
actual possession or occupation of the disputed property after the
execution of the deed of sale in her favor because she was already
able to perfect and complete her ownership of and title over the
subject property.
As to Danielas affidavit dated June 9, 1983, submitted by
petitioner, which confirmed the validity of the sale of the disputed
lot in her favor, the same has no probative value, as the sworn
statement earlier adverted to, for being hearsay. Naturally, private
respondents were not able to cross-examine the deceased-affiant
on her declarations contained in the said affidavit.
However, even if Danielas affidavit of June 9, 1983 is disregarded,
the fact remains that private respondents failed to prove by clear,
strong and convincing evidence beyond mere preponderance of
evidence37 that the contract of sale between Daniela and petitioner
was simulated. The legal presumption is in favor of the validity of
contracts and the party who impugns its regularity has the burden
of proving its simulation.38 Since private respondents failed to
discharge the burden of proving their allegation that the contract of
sale between petitioner and Daniela was simulated, the
presumption of regularity and validity of the October 14, 1969
Deed of Absolute Sale stands.
Considering that the Court finds the subject contract of sale
between petitioner and Daniela to be valid and not fictitious or
simulated, there is no more necessity to discuss the issue as to
whether or not a trust relationship was created between them.
WHEREFORE, the petition is GRANTED. The assailed Decision
and Resolution of the Court of Appeals in CA-G.R. CV No. 64122,
affirming the Decision of the Regional Trial Court of Cadiz City,
Negros Occidental, Branch 60, in Civil Case No. 278-C,
are REVERSED AND SET ASIDE. The complaint of the private
respondents isDISMISSED.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 150925 May 27, 2004
SPOUSES JAMES TAN and FLORENCE TAN, petitioners,
vs.
CARMINA, REYNALDO, YOLANDA and ELISA, all surnamed
MANDAP, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision1 dated August 10, 2001, of
the Court of Appeals, in CA-G.R. CV No. 59694, which affirmed in
toto the decision,2 dated March 25, 1998, of the Regional Trial
Court (RTC) of Manila, Branch 34, in Civil Case No. 89-50263. The
trial court declared the sale of properties between Dionisio
Mandap, Sr., and the spouses Crispulo and Elenita Vasquez
simulated and thus void, and hence, the subsequent sale between
the Vasquez spouses and petitioners herein, the spouses James
and Florence Tan, similarly void. Likewise assailed by the
petitioners is the resolution3 dated November 23, 2001 of the
appellate court, denying their motion for reconsideration.
The pertinent facts, as found by the trial court, are as follows:
The respondents are the legitimate children of the
marriage of Dionisio Mandap, Sr., and Maria Contreras
Mandap. When the Mandap spouses parted ways, their
children opted to stay with Maria. To help support the
children, Maria filed Civil Case No. E-02380 in the former
Juvenile and Domestic Relations Court of Manila for the
dissolution and separation of the conjugal partnership.
Two separate lots, each with an area of 88 square meters covered
by TCT Nos. 44730 and 55847, respectively, located in Felix
Huertas Street, Sta. Cruz, Manila, with improvements thereon,
were adjudicated by the Juvenile and Domestic Relations Court in
favor of Dionisio Mandap, Sr.
Meanwhile, Dionisio Mandap, Sr., until his death on October 2,
1991 at age 64, lived with Diorita Dojoles, with whom he had two
children. He suffered from diabetes since 1931, became totally
blind in 1940, and was crippled for about 10 years until his death.
However, before his death on May 25, 1989, he conveyed the
subject properties to his common-law wifes sister, Elenita Dojoles
Vasquez; and her husband, Crispulo Vasquez. As a result of this
sale, TCT Nos. 44730 and 55847 were cancelled and TCT Nos.
186748 and 186749 covering the subject properties were issued in
the name of Elenita Vasquez married to Crispulo Vasquez.
On September 11, 1989, the Vasquez spouses conveyed the
parcel of land covered by TCT No. 186748 in favor of petitioners.
TCT No. 188862 covering the subject lot was then issued in favor
of the latter.
On September 5, 1989, prior to the sale to petitioners, the
respondents filed an action for cancellation of title with damages,
before the RTC of Manila against Diorita Dojoles and the Vasquez
spouses, alleging that the sale of subject properties by their father
was fictitious, and without any consideration. Further, the consent
of their father was vitiated due to his physical infirmities. The action
was docketed as Civil Case No. 89-50263.
On February 15, 1991, respondents filed a supplemental
complaint, this time against the spouses Tan, for the nullification of
the sale to the latter of subject lot.
On March 25, 1998, the trial court decided Civil Case No. 89-
50263 in favor of the herein respondents. The decretal part of its
judgment reads as follows:
WHEREFORE, premises considered judgment is hereby
rendered as follows:
IN CIVIL CASE NO. 89-50263
1. Declaring the Deeds of Sale (Exh. "A" and
"A-1"; "B" and "B-1") both dated May 25, 1989
executed in favor of Elenita Vasquez married to
Crispulo Vasquez as null and void and of no
legal force and effect whatsoever;
2. Ordering the Register of Deeds of Manila to
cancel TCT No. 186748 (Exh. "K" to "K-2") and
TCT No. 186749 (Exh. "L" and "L-1") registered
in the name of Elenita Vasquez married to
Crispulo Vasquez having been issued thru a
void and inexistent contract; further ordering the
reconveyance of said title to the Estate of
Dionisio Mandap, Sr.;
3. Ordering the plaintiffs or the Estate of
Dionisio Mandap, Sr., to reimburse or return the
sum ofP570,000.00 representing the purchase
price of the subject lot, plus legal rate of interest
starting from the rendition of this decision until
fully paid;
4. Ordering the defendants Spouses Crispulo
and Elenita Vasquez and Diorita Dojoles to
jointly and severally reimburse or return the
fruits or earnings in the mentioned lots in the
form of rentals which is hereby fixed
at P10,000.00 per month from the date this
complaint was filed until defendants restore
and/or surrender the subject premises to the
Estate of Dionisio Mandap, Sr.;
5. Ordering the defendants Spouses Crispulo
and Elenita Vasquez and Diorita Dojoles to pay
attorneys fees in the amount of P50,000.00
and to pay the costs of this suit.
IN THE SUPPLEMENTAL COMPLAINT AGAINST
SPOUSES JAMES AND FLORENCE TAN
1. Declaring the Deed of Sale dated September
11, 1989 (Exh. "Q" and "7", Tan) executed by
Elenita Vasquez married to Crispulo Vasquez
as null and void and of no force and effect
whatsoever, the vendor having no valid title to
dispose of the same;
2. Ordering the Register of Deeds of Manila to
cancel TCT No. 188862 issued in the name of
James Tan, the source of which having been
declared null and void;
3. Ordering Spouses Crispulo and Elenita
Vasquez to return the sum of P1,000,000.00
representing the purchase price of the lot
covered by TCT No. 188862 with legal rate of
interest from the date of this decision;
4. Ordering defendants James and Florence
Tan to jointly and severally pay the sum
of P15,000.00 as and for attorneys fees.
IN BOTH CASES THE COUNTERCLAIMS
INTERPOSED BY THE DEFENDANTS ARE
DISMISSED FOR LACK OF MERIT.
SO ORDERED.4
From the above judgment, petitioners appealed to the Court of
Appeals in CA-G.R. CV No. 59694 on the ground that the trial
court erred in not declaring them to be buyers in good faith and in
not sustaining the validity of their title, TCT No. 188862.
In its decision dated August 10, 2001, the Court of Appeals found
the appeal bereft of merit and affirmed in totothe lower court
decision, thus:
WHEREFORE, the appeals interposed by appellants
Dojoles, Sps. Vasquez and Sps. James and Florence
Tan is without merit; the Decision of the lower court dated
March 25, 1998 is AFFIRMED in toto.
Costs against appellants.
SO ORDERED.5
Petitioners seasonably moved for reconsideration, but it was
denied by the appellate court.
Hence, this petition for review, submitting the following issues for
our resolution:
I
WHETHER OR NOT PETITIONERS HAVE THE LEGAL
PERSONALITY TO BRING THE INSTANT PETITION.
II
WHETHER OR NOT THE SALE BETWEEN MANDAP
SR. AND THE VASQUEZES IS VALID.
III
WHETHER OR NOT THE SALE BETWEEN THE
VASQUEZES AND PETITIONERS IS VALID.
IV
WHETHER OR NOT THE AWARD OF ATTORNEYS
[FEES] HAS LEGAL BASIS.6
Anent the first issue, the petitioners submit that having been made
parties-defendants by respondents via the supplemental complaint
in Civil Case No. 89-50263, they have the right to appeal to this
Court the adverse ruling of the appellate court against them, even
if their co-defendants did not appeal the said ruling of the Court of
Appeals.
Respondents counter that petitioners have no legal personality to
appeal the decision of the appellate court voiding the sale between
Dionisio Mandap, Sr., and the Vasquez spouses. They contend
that inasmuch as the latter did not appeal the questioned decision,
it had become final and executory. Respondents contend that
petitioners, not being privy to said sale, cannot invoke its validity.
We find for petitioners on this issue. The trial court voided the
petitioners sale of subject lot, and on appeal that decision was
affirmed by the Court of Appeals. Hence, as aggrieved parties,
petitioners may elevate to the Supreme Court the controversy
within the prescriptive period for appeal.7 They possess locus
standi, or legal personality, to seek a review by this Court of the
decision by the appellate court which they assail. Note that while
petitioners elevated the trial courts decision to the appellate court,
their co-defendants in Civil Case No. 89-50263 did not do so.
Thus, the trial courts decision became final and executory only as
to petitioners co-defendants in the trial court who did not appeal,
namely Diorita Dojoles and the Vasquez spouses.
With regard to the second issue, the petitioners insist the essential
requisites of a contract of sale have been satisfied, namely, (1)
consent of the contracting parties, (2) object certain, and (3) cause
or consideration therefor. They have been satisfied first in the sale
by Mandap, Sr., of the lots to the Vasquez spouses and
subsequently, in the sale by the Vasquezes to petitioners. Hence,
petitioners contend that it was error for the appellate court to
declare the sale to them of the subject lot null and void.
After careful consideration of the submission of the parties, we find
in favor of respondents. Petitioners contentions lack merit.
At the time Dionisio Mandap, Sr., purportedly sold the lots in
question to the Vasquez spouses, he was already totally blind and
paralyzed. He could not possibly have read the contents of the
deeds of sale. He could not have consented to a contract whose
terms he never knew nor understood. It cannot be presumed
Mandap, Sr., knew the contents of the deeds of sale disposing of
his properties. Article 1332 of the Civil Code is applicable in these
circumstances, to wit:
ART. 1332. When one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former.
As the party seeking to enforce the contract, the petitioners should
have presented evidence showing that the terms of the deeds of
sale to the Vasquez spouses were fully explained to Mandap, Sr.
But petitioners failed to comply with the strict requirements of
Article 1332, thereby casting doubt on the alleged consent of the
vendor. Since the vendor in this case was totally blind and crippled
at the time of the sale, entirely dependent on outside support,
every care to protect his interest conformably with Article 24 of the
Civil Code must be taken. Article 24 is clear on this.
ART. 24. In all contractual, property or other relations, when one of
the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age
or other handicap, the courts must be vigilant for his protection.
Petitioners presented no evidence disproving that (1) Mandap, Sr.
was totally blind and suffering from acute diabetes such that he
could no longer discern the legal consequences of his acts, and (2)
that undue influence was exerted upon him, which vitiated his
consent.
It is true that he who alleges a fact bears the burden of proving it.
However, since fraud and undue influence are alleged by
respondents, the burden shifts8 to petitioners to prove that the
contents of the contract were fully explained to Mandap, Sr.
Nothing, however, appears on record to show that this requirement
was complied with. Thus, the presumption of fraud and undue
influence was not rebutted.
More important, evidence on record, in our view, prove the
existence of fraud. On August 1, 1990, commissioners appointed
by the lower court conducted an ocular inspection concerning the
physical condition of Mandap, Sr. He stated on that occasion that
he received P550,000 as first payment, another P550,000 as
second payment, andP1,550,000 the remaining balance of the
total selling price of what was loaned to the vendees. However, in
the deeds of sale covering the subject properties, the prices
indicated were P250,000 and P320,000, respectively or a total of
only P570,000. This inconsistency in the amount of the
consideration is unexplained. They point to fraud in the sale of the
subject properties, to the prejudice of Mandap, Sr.
Petitioners do not dispute the fact that the notary public who
notarized the deeds of sale was not duly commissioned. But they
contend the deeds validity were not affected. However, it bears
stressing that even an apparently valid notarization of a document
does not guarantee its validity.9 The crucial point here is that while
Mandap, Sr., testified that he executed the deeds of sale in Las
Pias, the said documents were actually notarized in Manila.
Mandap, Sr., did not personally appear before a notary public. Yet
the documents stated the contrary. Such falsity raises doubt
regarding the genuineness of the vendors alleged consent to the
deeds of sale.
Petitioners also claim the purchase price was not grossly
inadequate so as to invalidate the sale of subject properties. True,
mere inadequacy of the price does not necessarily void a contract
of sale. However, said inadequacy may indicate that there was a
defect in the vendors consent.10 More important, it must be
pointed out that the trial court and the Court of Appeals voided the
sale of the subject properties not because the price was grossly
inadequate, but because the presumptions of fraud and undue
influence exerted upon the vendor had not been overcome by
petitioners, the parties interested in enforcing the contract.
On the third issue, petitioners argue that since the sale of subject
properties by Mandap, Sr. to the Vasquez spouses is valid, it
follows that the subsequent sale of the property by the latter to
petitioners is also valid. But this contention cannot be sustained,
since we find that based on the evidence on record, the sale in
favor of the Vasquez spouses is void. Hence, it follows that the
sale to petitioners is also void, because petitioners merely stepped
into the shoes of the Vasquez spouses. Since the Vasquezes as
sellers had no valid title over the parcel of land they sold,
petitioners as buyers thereof could not claim that the contract of
sale is valid.
On the last issue, petitioners contest the award of attorneys fees.
Indeed, no premium should be placed on the right to litigate, and
not every winning party is entitled to an automatic grant of
attorneys fees.11 The party must show that he falls under one of
the instances enumerated in Article 2208 of the Civil Code, to wit:
ART. 2208. In the absence of stipulation, attorneys fees
and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(11) In any other case where the court deems it
just and equitable that attorneys fees and
expenses of litigation should be recovered.
In this particular case, the award of attorneys fees is just and
equitable, considering the circumstances herein. The court a
quos order to pay P15,000 as attorneys fees does not appear to
us unreasonable but just and equitable.
WHEREFORE, the petition is hereby DENIED. The decision of the
Court of Appeals dated August 10, 2001 in CA-G.R. CV No. 59694,
which sustained the decision dated March 25, 1998 of the
Regional Trial Court of Manila, Branch 34, is AFFIRMED. Costs
against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 132887. August 11, 2005
THE MANILA BANKING CORPORATION, Petitioners,
vs.
EDMUNDO S. SILVERIO and THE COURT OF
APPEALS, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before the Court is a petition for review on certiorari of the
Decision1 and Resolution2 of the Court of Appeals reversing the
dismissal by the Regional Trial Court (RTC) of Makati City of the
petition of private respondent for cancellation of notice of levy on
attachment and writ of attachment on two (2) parcels of land
located in Paraaque City.
The facts that gave rise to the present controversy are as follows:
Purificacion Ver was the registered owner of two parcels of land
located at La Huerta, Paraaque City, covered by Transfer
Certificates of Title (TCTs) No. 31444 (452448) and No. 45926
(452452) of the Registry of Deeds of Paraaque City.3
On 16 April 1979, Purificacion Ver sold the properties to Ricardo C.
Silverio, Sr. (Ricardo, Sr.) for P1,036,475.00.4The absolute deed of
sale evidencing the transaction was not registered; hence, title
remained with the seller, Purificacion Ver.
On 22 February 1990, herein petitioner, The Manila Banking
Corporation (TMBC), filed a complaint with the RTC of Makati City
for the collection of a sum of money with application for the
issuance of a writ of preliminary attachment against Ricardo, Sr.
and the Delta Motors Corporation docketed as Civil Case No. 90-
513.5 On 02 July 1990, by virtue of an Order of Branch 62 of the
RTC of Makati City, notice of levy on attachment of real property
and writ of attachment were inscribed on TCTs No. 31444
(452448) and No. 45926 (452452).6 On 29 March 1993, the trial
court rendered its Decision in favor of TMBC and against Ricardo,
Sr. and the Delta Motors Corporation.7 The Decision was brought
up to the Court of Appeals for review.8
In the meantime, on 22 July 1993, herein private respondent,
Edmundo S. Silverio (Edmundo), the nephew9 of judgment debtor
Ricardo, Sr., requested TMBC to have the annotations on the
subject properties cancelled as the properties were no longer
owned by Ricardo, Sr.10 This letter was referred to the Bangko
Sentral Ng Pilipinas, TMBCs statutory receiver.11 No steps were
taken to have the annotations cancelled.12 Thus, on 17 December
1993, Edmundo filed in the RTC of Makati City a case for
"Cancellation of Notice of Levy on Attachment and Writ of
Attachment on Transfer Certificates of Title Nos. 452448 and
452452 of the Office of the Registrar of Land Titles and Deeds of
Paraaque, Metro Manila." In his petition, Edmundo alleged that as
early as 11 September 1989, the properties, subject matter of the
case, were already sold to him by Ricardo, Sr. As such, these
properties could not be levied upon on 02 July 1990 to answer for
the debt of Ricardo, Sr. who was no longer the owner thereof. In its
Answer with Compulsory Counterclaim, TMBC alleged, among
other things, that the sale in favor of Edmundo was void, therefore,
the properties levied upon were still owned by Ricardo, Sr., the
debtor in Civil Case No. 90-513.
On 02 May 1995, after trial on the merits, the lower court rendered
its Decision dismissing Edmundos petition. TMBCs counterclaim
was likewise dismissed for lack of sufficient merit. The trial court
held:
After a careful study of the facts proven in the instant case, the
Court is compelled to rule that the petitioner is not entitled to a
cancellation of the annotations/inscriptions of the notice of levy on
attachment and writ of attachment appearing on Transfer
Certificates of Title Nos. 45228 31444 and (452452) 45926 of the
Registry of Deeds of Paraaque, Metro Manila. The Court is
inclined to agree with the contention of oppositor that the
supposed deed of sale in favor of herein petitioner is fictitious and
simulated and thus void ab initio. The all-important factor that what
appears in the notarial register of the notary public, albeit in loose
form, is not a deed of sale but a mere affidavit of a different person
Maria J. Segismundo --, as shown in Exhibit 10-A, is sufficient to
prove that no effective, valid and legal sale of the properties in
question was executed between the Silverio uncle and nephew.
There being no valid sale to him, petitioner has no right at all to
ask for the cancellation of the aforementioned annotations.
WHEREFORE, the instant petition is hereby dismissed, with costs
against petitioner. Oppositors counterclaim is ordered dismissed
for lack of sufficient merit.13
The Court of Appeals, upon reviewing the case at the instance of
Edmundo, reversed and set aside the trial courts ruling. The
dispositive portion of its Decision reads:
WHEREFORE, foregoing considered, the appealed decision is
hereby REVERSED and SET-ASIDE. A new one is rendered
ORDERING the Register of Deeds of Paraaque City to cancel the
Notice of Levy on Attachment and the Writ of Attachment made on
TCT Nos. 452448 and 452452.
Costs against oppositor-appellee.14
The motion for reconsideration filed by TMBC was denied for lack
of merit in a Resolution dated 25 February 1998. 15
Hence, the present petition, TMBC imputing upon the Court of
Appeals grave error in:
I.
. . . HOLDING THAT PETITIONER TMBC CANNOT QUESTION
THE VALIDITY OF THE SALE OF THE PROPERTIES COVERED
BY TCT NO. 31444 (452448) AND 45926 (452452); UNDER
ARTICLE 1421 OF THE CIVIL CODE, THE DEFENSE OF
NULLITY OF A CONTRACT IS AVAILABLE TO THIRD PERSONS
WHOSE INTERESTS ARE DIRECTLY AFFECTED.
II.
ORDERING THE CANCELLATION OF THE NOTICE OF LEVY
ON ATTACHMENT AND THE WRIT OF ATTACHMENT MADE ON
TCT NO. 452448 AND 452452 SINCE AS AGAINST TWO (2)
TRANSACTIONS CONCERNING THE SAME LAND, THE
REGISTERED TRANSACTION PREVAILS OVER THE ALLEGED
EARLIER UNREGISTERED RIGHT.
III.
FINDING THAT PETITIONER TMBC IS GUILTY OF BAD
FAITH IN FAILING TO MAKE INQUIRIES ON THE RIGHTS OF
RICARDO SILVERIO, SR. OVER THE SUBJECT PROPERTIES.
Basic is the rule that only properties belonging to the debtor can be
attached, and an attachment and sale of properties belonging to a
third party are void.16 At the pith of the controversy, therefore, is the
issue of ownership of the subject properties at the time of the levy
thereof as the right of petitioner TMBC, as creditor, depends on
whether such properties were still owned by its debtor, Ricardo,
Sr., and not by Edmundo, who is concededly not a debtor of
TMBC. If the properties were validly transferred to Edmundo
before the levy thereof then cancellation of the annotation is in
order. If, however, the sale was absolutely simulated and was
entered into between uncle and nephew for the lone reason of
removing the properties from the reach of TMBC, then the
annotation should stay.
The issue of whether the contract is simulated or real is factual in
nature, and the Court eschews factual examination in a petition for
review under Rule 45 of the Rules of Court.17 This rule, however, is
not without exceptions, one of which is when there exists a conflict
between the factual findings of the trial court and of the appellate
court,18 as in the case at bar.
The trial court, in ruling that TMBC was well within its rights to
cause the levy of the properties through a writ of preliminary
attachment, held that the sale between Ricardo, Sr. and his
nephew, Edmundo, ostensibly effected before the levy of the
subject properties, was void for being absolutely simulated. The
fictitious nature of the sale between the uncle and nephew,
according to the trial court, is made evident by the "all-important
factor that what appears in the notarial register of the notary public,
albeit in loose form, is not a deed of sale but a mere affidavit of a
different person Maria J. Segismundo -- as shown in Exhibit 10-
A." The trial court thus concluded that as the sale was void, the
properties were still owned by Ricardo, Sr. at the time the levy
thereon was effected.
In reversing the trial court, the Court of Appeals reasoned, among
other things, that the sale between Ricardo, Sr. and Edmundo was
not void and that assuming it to be void, only the parties to the sale
and/or their assigns can impugn or assail its validity. Moreover,
assailing the validity of a sale for being in fraud of creditors is a
remedy of last resort, i.e., accion pauliana can be availed of only
after the creditor has had exhausted all the properties of the debtor
not exempt from execution.19 In herein case, it does not appear
that TMBC sought other properties of Ricardo, Sr. other than the
subject properties alleged to have been transferred in fraud of
creditors. Thus, as the sale of the subject properties was not void,
it rightfully transferred ownership to Edmundo who is not a debtor
of TMBC. Consequently, TMBC could not legally attach the same
under Section 5, Rule 57 of the Rules of Civil Procedure.
The validity of the contract of sale being the focal point in the two
courts decision, we begin our analysis into the matter with two
veritable presumptions: first, that there was sufficient consideration
of the contract20 and, second, that it was the result of a fair and
regular private transaction.21 As we held in Suntay v. Court of
Appeals,22 if shown to hold, these presumptions infer prima
facie the transactions validity, except that it must yield to the
evidence adduced.
Between the disparate positions of the trial court and the Court of
Appeals, we find those of the trial court to be more in accord with
the evidence on hand and the laws applicable thereto.
It will be noted that the Court of Appeals never justified its ruling
that the lower court erred in finding the subject sale was void. On
the other hand, the evidence is overwhelming that the sale dated
11 September 1989 between Ricardo Sr. and Edmundo was
absolutely simulated and that it was non-existent prior to its initial
appearance on 22 July 1993 when the latter wrote TMBC to cause
the cancellation of its lien.
An absolutely simulated contract, under Article 1346 of the Civil
Code, is void.23 It takes place when the parties do not intend to be
bound at all.24 The characteristic of simulation is the fact that the
apparent contract is not really desired or intended to produce legal
effects or in any way alter the juridical situation of the
parties.25 Thus, where a person, in order to place his property
beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and
control of the property; hence, the deed of transfer is but a
sham.26 Lacking, therefore, in a fictitious and simulated contract is
consent which is essential to a valid and enforceable contract. 27
In herein case, badges of fraud and simulation permeate the whole
transaction, thus, we cannot but refuse to give the sale validity and
legitimacy. Consider the following circumstances:
1) There is no proof that the said sale took place prior to the date
of the attachment. The notarized deed of sale, which would have
served as the best evidence of the transaction, did not materialize
until 22 July 1993, or three (3) years after TMBC caused the
annotation of its lien on the titles subject matter of the alleged sale.
Mr. Jerry Tanchuan, Archivist 1 of the Records Management of the
Archives Office (RMAO), testified that the procedure being
followed with respect to notarized documents is that the Records
Section of the RTC will transmit to the RMAO copies in its
possession of the original documents notarized by a notary public
together with the Notarial Registry Book.28 In herein case, the RTC
did not transmit any book of Atty. Anacleto T. Lacanilao, Jr., the
notary public who allegedly notarized the deed of sale between
Ricardo, Sr. and Edmundo for the year 1989. 29 Instead, what the
RMAO was in possession of was only a loose leaf entry form for
"Document No. 444, Page 90, Book No. 17, Series of 1989" which
is an affidavit of one Maria J. Segismundo dated 11 September
1989.30 The RMAO did not have available in its file the particular
deed of sale acknowledged by Atty. Lacanilao as Document No.
444, Page 90, Book No. 17, Series of 1989.31 In Tala Realty
Services Corporation v. Banco Filipino Savings and Mortgage
Bank,32 as reiterated in two other Tala cases,33 the Court rejected a
notarized deed that was not reported to the Clerk of Court of the
RTC by the notary public who notarized it. The Court held that this
fact militates against the use of the document as basis to uphold
the petitioners claim. The same is true in this case. The fact that
the assailed deed of sale is not one of those submitted by Atty.
Lacanilao to the Clerk of Court of the RTC of Makati City34 renders
it virtually worthless in the absence of corroboration as to its due
execution other than petitioner (now private respondent)
Edmundos self-serving statements. This being the case, Edmundo
could simply have presented the witnesses to the transaction (his
wife and his lawyer), Atty. Lacanilao or the seller himself, Ricardo
Sr., to testify as to the execution of the contract of sale on 11
September 1989. This he did not do, thus lending more credence
to the theory of TMBC that the sale was entered into only as an
afterthought, hatched to prevent the transfer of the properties to
TMBC after the latter had already annotated its lien thereon.
2) Edmundo, to say the least, was very evasive when questioned
regarding details of the alleged sale. The deed of sale mentioned
Three Million One Hundred Nine Thousand and Four Hundred
Twenty-Five pesos (P3,109,425.00) as the contract price paid by
hand during the execution of the contract, yet, when asked on
cross-examination, Edmundo could not remember if he paid
directly to Ricardo, Sr.35 Worse, he could not remember where
Ricardo, Sr. was at the time of the sale.36 Thus:
Q: Now, Mr. Silverio, there is on page 2 marked as Exhibit "D-1" a
signature over the typewritten name Edmundo S. Silverio, will you
please tell us whose signature is that?
A. My signature.
Q. And again, there is a signature over the typewritten name
Ricardo Silverio, vendor, will you please tell us whose signature is
that?
A: That is the signature of the seller.
Q: And why do you say or how did you know that this is the
signature of Ricardo Silverio?
A: Because the Deed of Absolute Sale was executed and signed
infront of me.37
...
Q: And Mr. Witness, at the time of the Deed of Sale on September
11, 1989, was Ricardo Silverio in the country at that time?
A: I cannot give the exact presence of him. I cannot remember
now.
Q: But at the time of the Deed of Sale on September 11, 1989, you
know if he was in the country or not?
A: I cannot remember.
Q: With respect to the consideration for the purchase of subject
parcels of land, what was the manner of payment for said
consideration?
A: It is already mentioned in the Deed of Absolute Sale.
Q: In the deed of Absolute Sale there is mentioned made by hand,
can you explain that?
A: The Deed of Absolute Sale clearly specified already the
payment on which the payment was made.
Q: The Deed of Absolute Sale mentioned by hand, what does that
mean that you personally handed the payment to Mr. Silverio?
A: Payment was made to him.
Q: By hand you mean he was present?
A: When you said date, there was an exemption of payments
made.
Q: But you gave the payment personally to Mr. Silverio?
A: I have to recall.
Q: So you cannot recall?
A: I cannot recall.38
If it were true that money indeed changed hands on 11 September
1989 as evidenced by the assailed deed of sale, then, at the very
least, Edmundo, as buyer, would definitely not have forgotten
personally handingP3,109,425.00 to the seller, Ricardo, Sr. It goes
against ordinary human experience for a person to simply forget
the details of the day when he became poorer by P3,109,425.00
cash. The only logical conclusion is that there was actually no
consideration for the said sale. Verily, a deed of sale in which the
stated consideration has not in fact been paid is a false contract
that is void ab initio.39 Likewise, "a contract of purchase and sale is
null and void and produces no effect whatsoever where it appears
that [the] same is without cause or consideration which should
have been the motive thereof, or the purchase price appears
thereon as paid but which in fact has never been paid by the
purchaser to the vendor." 40
3) As correctly pointed out by TMBC, an indication of simulation of
contract is the complete absence of an attempt in any manner on
the part of the ostensible buyer to assert rights of ownership over
the subject properties. In herein case, Edmundo did not attempt to
have the 1989 deed of sale registered until 1993. 41 He was not in
possession of the properties.42 He did not have a contract of lease
with the actual occupant of the properties.43As late as 1991, it was
Ricardo, Sr. who was claiming to be the rightful owner of the
properties in connection with an ejectment case he filed against
third persons.44 When asked to explain why it was Ricardo, Sr. who
was asserting ownership over the properties, Edmundo lamely
replied "because I am asking him so."45
Taken together with the other circumstances surrounding the sale,
Edmundos failure to exercise acts of dominium over the subject
properties buttresses TMBCs position that the former did not at all
intend to be bound by the contract of sale. In Suntay,46 as
reiterated in such cases as Santiago v. Court of Appeals,47 Cruz v.
Bancom Finance Corporation48 and Ramos v. Heirs of Ramos,
Sr.,49 we held that "the most proturberant index of simulation is the
complete absence of an attempt in any manner on the part of the
[ostensible buyer] to assert his rights of ownership over the
[properties] in question." The supposed buyers failure to take
exclusive possession of the property allegedly sold or, in the
alternative, to collect rentals, is contrary to the principle of
ownership.50Such failure is a clear badge of simulation that renders
the whole transaction void pursuant to Article 1409 of the Civil
Code.51
When a contract is void, the right to set-up its nullity or non-
existence is available to third persons whose interests are directly
affected thereby.52 The material interest of TMBC need not be
belabored. Suffice it to say that as judgment creditor of Ricardo,
Sr., it has the right to protect its lien acquired through a writ of
preliminary attachment as security for the satisfaction of any
judgment in its favor.
The Court of Appeals, however, erroneously ruled that TMBC
should first go after the properties of its debtor, Ricardo, Sr., and,
failing therein would be the only time it will acquire a material
interest over the subject properties, thus:
Article 117 of the New Civil Code is very explicit that the right or
remedy of the creditor to impugn the acts which the debtor may
have done to defraud them is subsidiary in nature. It can only be
availed of in the absence of any other legal remedy to obtain
reparation for the injury. Otherwise stated, the right of accion
pauliana can be availed of only AFTER the creditor have
exhausted all the properties of the debtor not exempt from
executions.
This fact is not present in this case. Not a single proof was offered
to show that oppositor-appellee had exhausted all the properties of
Ricardo Silverio before it tried to question the validity of the
contract of sale. In fact, oppositor-appellee never alleged in its
pleadings that it had exhausted all the properties of Ricardo
Silverio before it impugned the validity of the sale made by Ricardo
Silverio to petitioner-appellant.
This being the case, oppositor-appellee cannot and is not in the
proper position to question the validity of the sale of the subject
properties by Ricardo Silverio to petitioner-appellant. Oppositor-
appellee has not shown that it has the material interest to question
the sale.53
Contrary to the position taken by the Court of Appeals, TMBC need
not look farther than the subject properties to protect its rights. The
remedy of accion pauliana is available when the subject matter is a
conveyance, otherwise valid undertaken in fraud of
creditors.54 Such a contract is governed by the rules on rescission
which prescribe, under Art. 1383 of the Civil Code, that such action
can be instituted only when the party suffering damage has no
other legal means to obtain reparation for the same. The contract
of sale before us, albeit undertaken as well in fraud of creditors, is
not merely rescissible but is void ab initio for lack of consent of the
parties to be bound thereby. A void or inexistent contract is one
which has no force and effect from the very beginning, as if it had
never been entered into; it produces no effect whatsoever either
against or in favor of anyone.55 Rescissible contracts, on the other
hand, are not void ab initio, and the principle, "quod nullum est
nullum producit effectum," in void and inexistent contracts is
inapplicable.56 Until set aside in an appropriate action, rescissible
contracts are respected as being legally valid, binding and in
force.57 Tolentino, a noted civilist, distinguished between these two
types of contracts entered into in fraud of creditors, thus:
Absolute simulation implies that there is no existing contract, no
real act executed; while fraudulent alienation means that there is a
true and existing transfer or contract. The former can be attacked
by any creditor, including one subsequent to the contract; while the
latter can be assailed only by the creditors before the alienation. In
absolute simulation, the insolvency of the debtor making the
simulated transfer is not a prerequisite to the nullity of the contract;
while in fraudulent alienation, the action to rescind, or accion
pauliana, requires that the creditor cannot recover in any other
manner what is due him. Finally, the action to declare a contract
absolutely simulated does not prescribe (articles 1409 and 1410);
while the accion pauliana to rescind a fraudulent alienation
prescribes in four years (article 1389).58
IN SUM, considering that an absolutely simulated contract is not a
recognized mode of acquiring ownership,59 the levy of the subject
properties on 02 July 1990 pursuant to a writ of preliminary
attachment duly issued by the RTC in favor of TMBC and against
its debtor, Ricardo, Sr., was validly made as the properties were
invariably his. Consequently, Edmundo, who has no legal interest
in these properties, cannot cause the cancellation of the
annotation of such lien for the reasons stated in his petition.
WHEREFORE, premises considered, the Decision of the Court of
Appeals dated 17 October 1997 and its Resolution dated 25
February 1998 are hereby REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Makati City, Branch 145,
dated 02 May 1995, is REINSTATED, dismissing the petition for
Cancellation of Notice of Levy on Attachment and Writ of
Attachment on Transfer Certificates of Title No. 31444 (452448)
and No. 45926 (452452) of the Registry of Deeds of Paraaque
City. With costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 161298 January 31, 2006
Spouses ANTHONY and PERCITA OCO, Petitioners,
vs.
VICTOR LIMBARING, Respondent.
DECISION
PANGANIBAN, CJ.:
Basic in procedural law is the rule that every action must be
prosecuted or defended in the name of the real party in interest. In
the present case, the respondent, who was not a party to the
contracts being sued upon, was not able to prove material interest
in the litigation. For his failure to do so, the trial court cannot be
faulted for dismissing the action to rescind the contracts. His status
as trustor remained a bare allegation, as he had failed to rebut the
legal presumption: that there is absence of a trust when the
purchase price in a deed of sale is paid by a parent in favor of a
child. Here, the prima facie presumption is "that there is a gift in
favor of the child." Any allegation to the contrary must be proven by
clear and satisfactory evidence, a burden that was not discharged
by the plaintiff.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of
Court, assailing the August 26, 2003 Decision2and the November
25, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR CV
No. 69386. The challenged Decision disposed as follows:
"WHEREFORE, the order dated October 2, 2000 of the Regional
Trial Court, Branch 15, Ozami[s] City in Civil Case No. OZC 99-14
is hereby REVERSED. The agreement entered upon by plaintiff-
appellant and defendant-appellee Percita L. Oco is hereby
RESCINDED. After returning the agreed purchase amount
of P60,000.00 to defendants-appellees, the Register of Deeds of
Ozami[s] City shall issue the new Transfer Certificates of Title in
the name of plaintiff-appellant thereby canceling the TCT Nos. T-
22073 and T-22072."4
The Facts
The pertinent facts are not disputed. Sometime in 1996, Sabas
Limbaring subdivided his Lot 2325-D, covered by Transfer
Certificate of Title (TCT) No. 5268, into two lots denominated as
Lot Nos. 2325-D-1 and 2325-D-2.5 He then executed in favor of
Jennifer Limbaring a Deed of Sale for Lot 2325-D-2 for P60,000;
and, in favor of Sarah Jane Limbaring, another Deed for Lot 2325-
D-1 for P14,440. Accordingly, TCT No. 5268 was cancelled and
TCT Nos. T-21921 and T-21920 were issued in the names of
Jennifer and Sarah Jane, respectively.6
Sensing some irregularities in the transaction, Percita Oco, the
daughter of Sabas Limbaring, left Puerto Princesa City and went to
Ozamis City.7 She then filed a case of perjury and falsification of
documents against respondent, her uncle who was the father of
Jennifer and Sarah Jane. During the pre-litigation conference
called by City Prosecutor Luzminda Uy on July 1, 1996, the parties
agreed that the two parcels of land should be reconveyed to
Percita, who was to pay respondent all the expenses that had
been and would be incurred to transfer the titles to her name.8
Respondent demanded P30,000 for the estimated expenses for
documentation, capital gains, and documentary stamp taxes;
registration fees for the Register of Deeds; and other incidental
expenses for clearances from the Department of Agrarian Reform
(DAR).9 Percita succeeded in lowering the amount to P25,000, for
which she executed an undertaking worded as follows:
"I, Percita Oco, of legal age, and residing at Puerto Princesa, do
hereby undertake to give the full amount of Twenty Five Thousand
(P25,000.00) Pesos to my uncle Victor Limbaring after document
No. 230, series of 1996; Transfer Certificate of Title No. T-21920
and Transfer Certificate of Title No. T-21921 shall have been
cancelled and revoked.
"Ozamis City, Philippines, July 1, 1996."10
Pursuant to their agreement, respondent facilitated the transfer of
the titles to her from the names of his daughters. After the transfer
had been effected on July 12, 1996, Percita left for Puerta
Princesa on July 17, 1996, without paying the P25,000. Several
demands were made, but she refused to pay.
On April 6, 1999, respondent filed against Spouses Anthony and
Percita Oco a Complaint for the rescission of the sales contracts,
with recovery of possession and ownership of the two parcels of
land.11 Among others, he claimed 1) that he was the actual buyer
of the lots, but the vendees whose names appeared on the Deeds
were his daughters; 2) that he initially refused to reconvey the
properties because he had paid for them with his hard-earned
money, which was partly used by Sabas Limbaring for medical
expenses; 3) that Percita had prepared the two Deeds of Sale,
which his daughters signed despite receiving no consideration as
stated in the Deeds; 4) that because she refused to pay
the P25,000, the Limbaring clan held a meeting on October 26,
1996, during which it was agreed that P1,000 per month would be
given to respondent from the rentals of Sabas Limbarings house;
and 5) that the agreement was not implemented, because Percita
had failed to cooperate.12
On May 27, 1999, Spouses Oco filed a Motion to Dismiss on the
ground that the plaintiff (herein respondent) was not the real party
in interest.13 In his Opposition to the Motion to Dismiss, respondent
contended that he was a trustor, whose property was being held in
trust by his daughters.14 He also averred that, on the assumption
that he was not the real party in interest, he was entitled to an
amendment of the pleadings.15
On August 30, 1999, the RTC issued an Order denying the Motion
to Dismiss. It ruled that evidence was required to resolve the
parties respective allegations.16
On October 4, 1999, Spouses Oco filed an Answer with
Counterclaim, alleging in the main: 1) that respondent had tried to
secure a DAR clearance and to have a certificate of title issued in
his name, but failed because Republic Act (RA) 6657 prohibited
the acquisition of more than five hectares of agricultural land; 2)
that through deceit and manipulation, respondent was able to
convince Sabas Limbaring to execute the two Deeds of Sale,
notwithstanding the lack of any consideration; 3) that Sabas
informed Percita that the agricultural land had never been sold; 4)
that she refused to pay the P25,000, because the suspensive
conditions stated in the Promissory Note had not been complied
with; 5) that she paid for all the expenses incurred in their
transaction; 6) that for her alleged failure to pay the P25,000 and
for "other deceits," respondent filed a criminal Complaint docketed
as Criminal Case No. 2985; 7) that respondent was guilty of forum
shopping for filing that case despite the institution of the civil
aspect in the criminal case; 8) that respondent was not the real
party in interest and had no legal standing to sue; 9) that the lots,
which were acquired by Jennifer and Sarah Jane without paying
any consideration, should be returned to Percita without any
consideration; and 10) that the Deeds of Sale reconveying the lots
acknowledged receipt of consideration.17
Respondent testified on his behalf. He then formally offered his
exhibits.18 After filing their Comments to Plaintiffs Formal Offer of
Exhibits, Spouses Oco filed a Demurrer to Evidence, to which he
filed his Opposition.19
On October 2, 2000, the RTC granted the demurrer and dismissed
the Complaint and Counterclaim,20 on the ground that respondent
was not the real party in interest. The trial court also held that
Jennifer and Sarah Jane had already acknowledged receipt of the
consideration for the reconveyance of the lots. It added that
the P25,000 was an independent obligation for the reimbursement
of the expenses incurred for the transfer of the titles.21
Ruling of the Court of Appeals
The CA held that a trust relationship was created when respondent
purchased the lots in favor of his daughters.22Thus, he was a real
party in interest.
The appellate court also ruled that the P25,000 was part of the
consideration for the reconveyance of the two parcels of
land.23 The CA held that, since Percita had admitted her failure to
pay the amount, respondent had the right to rescind the contracts
of reconveyance.24
The assailed November 25, 2003 CA Resolution denied
reconsideration. Hence, this Petition. 25
The Issues
Petitioners state the issues in this wise:
"I. The Honorable Court of Appeals gravely erred in finding
respondent the trustor of the subject properties and in declaring
respondent the real party in interest for the rescission of the two
deeds of absolute sale executed by Jennifer Limbaring and Sarah
Jane Limbaring in favor of the petitioners.
"II. The Honorable Court of Appeals gravely erred in declaring that
respondent has fully complied [with] his obligation in the
undertaking executed by petitioner after the ownership of the
subject properties were transferred to petitioners.
"III. The Honorable Court of Appeals gravely erred and gravely
abused [its] discretion in ordering the rescission of the Deed of
Absolute Sale executed by Jennifer Limbaring and Sarah Jane
Limbaring in favor of the petitioners involving the subject
properties.
"IV. The Honorable Court of Appeals gravely abused [its] discretion
when it ignored the pending case before the Fourth Division of the
Honorable Court of Appeals with the same transaction, essential
facts and circumstances in this case."26
The threshold issue is whether respondent, who was the plaintiff in
the trial court, was a real party in interest in the suit to rescind the
Deeds of Reconveyance.
The Courts Ruling
The Petition is meritorious.
Main Issue:
Real Party in Interest
Petitioners contend that respondent was not a trustor, and
therefore not the real party in interest and had no legal right to
institute the suit.27 The real parties in interest were Jennifer and
Sarah Jane, to whom the subject properties had been given as
gifts.28
The controversy centers on Rule 3 of the Rules of Court,
specifically an elementary rule in remedial law, which is quoted as
follows:
"Sec. 2. Parties in interest. A real party in interest is the party
who stands to be benefited or injured by the judgment in the suit,
or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted
or defended in the name of the real party in interest."
As applied to the present case, this provision has two
requirements: 1) to institute an action, the plaintiff must be the real
party in interest; and 2) the action must be prosecuted in the name
of the real party in interest.29Necessarily, the purposes of this
provision are 1) to prevent the prosecution of actions by persons
without any right, title or interest in the case; 2) to require that the
actual party entitled to legal relief be the one to prosecute the
action; 3) to avoid a multiplicity of suits; and 4) to discourage
litigation and keep it within certain bounds, pursuant to sound
public policy.30
Interest within the meaning of the Rules means material interest or
an interest in issue to be affected by the decree or judgment of the
case, as distinguished from mere curiosity about the question
involved.31 One having no material interest to protect cannot
invoke the jurisdiction of the court as the plaintiff in an
action.32 When the plaintiff is not the real party in interest, the case
is dismissible on the ground of lack of cause of action. 33
Action on Contracts
The parties to a contract are the real parties in interest in an action
upon it, as consistently held by the Court.34Only the contracting
parties are bound by the stipulations in the contract;35 they are the
ones who would benefit from and could violate it.36 Thus, one who
is not a party to a contract, and for whose benefit it was not
expressly made, cannot maintain an action on it. One cannot do
so, even if the contract performed by the contracting parties would
incidentally inure to ones benefit.37
As an exception, parties who have not taken part in a contract may
show that they have a real interest affected by its performance or
annulment.38 In other words, those who are not principally or
subsidiarily obligated in a contract, in which they had no
intervention, may show their detriment that could result from
it.39 Contracts pour autrui are covered by this exception.40 In this
latter instance, the law requires that the "contracting parties must
have clearly and deliberately conferred a favor upon a third
person." A "mere incidental benefit is not enough."
Action on the Contracts
Presently Involved
Respondents Complaint, entitled "Rescission of Contract &
Recovery of Possession & Ownership of Two Parcels of Land," is
clearly an action on a contract. The agreements sought to be
rescinded41 clearly show that the parties to the Deeds of Absolute
Sale were Jennifer and Sarah Jane Limbaring42 as vendors and
Percita Oco as vendee. Clearly then, the action upon the contracts
may -- as a rule -- be instituted only by Jennifer and Sarah Jane
against Percita.
Respondent is not a real party in interest. He was not a party to the
contracts and has not demonstrated any material interest in their
fulfillment. Evidently, the allegations in the Complaint do not show
that the properties would be conveyed to him, even if Percita were
to be proven to have committed a breach of the subject
agreements.
Trust Relationship
To show material interest, respondent argues that a trust was
created when he purchased the properties from Sabas Limbaring
in favor of his daughters. As trustor, he allegedly stands to be
benefited or injured by any decision in the case.43
Trust is the legal relationship between one person who has
equitable ownership of a property and another who owns the legal
title to the property.44 The trustor is the one who establishes the
trust; the beneficiary, the person for whose benefit the trust was
created; and the trustee, the one in whom, by conferment of a
legal title, confidence has been reposed as regards the property of
the beneficiary.45
Trusts may be either express or implied.46 Express trusts are those
created by direct and positive acts of the parties, such as by some
writing, deed or will; or by words either expressly or impliedly
evidencing an intention to create a trust. Implied trusts are those
that, without being expressed, are deducible from the nature of the
transaction as matters of intent; or that are super-induced in the
transaction by operation of law as a matter of equity, independently
of the particular intention of the parties.47
Respondent has presented only bare assertions that a trust was
created. Noting the need to prove the existence of a trust, this
Court has held thus:
"As a rule, the burden of proving the existence of a trust is on the
party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements.
While implied trusts may be proved by oral evidence, the evidence
must be trustworthy and received by the courts with extreme
caution, and should not be made to rest on loose, equivocal or
indefinite declarations. Trustworthy evidence is required because
oral evidence can easily be fabricated."48
On this point, the Civil Code states as follows:
"ART. 1448. There is an implied trust when property is sold, and
the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the
beneficiary. However, if the person to whom the title is conveyed is
a child, legitimate or illegitimate, of the one paying the price of the
sale, no trust is implied by law, it being disputably presumed that
there is a gift in favor of the child."
Under the last sentence of Article 1448, respondents alleged acts
-- paying the price of the subject properties and, in the titles,
naming his children as owners -- raise the presumption that a gift
was effected in their favor. Respondent failed to rebut this
presumption. Absent any clear proof that a trust was created, he
cannot be deemed a real party in interest.49 That he should be
deemed a trustor on the basis merely of having paid the purchase
price is plainly contradicted by the presumption based on Article
1448 of the Civil Code "that there is a gift in favor of the child," not
a trust in favor of the parent.
Other Issues
Having found that respondent is not a real party in interest, this
Court deems it no longer necessary to rule on the other issues
raised by petitioner.
WHEREFORE, the Petition is GRANTED, and the assailed
Decision and Resolution are SET ASIDE. Civil Case No. OZC99-
14, entitled "Victor Limbaring v. Spouses Percita L. Oco and
Anthony Oco," is DISMISSED. No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 169975 March 18, 2010
PAN PACIFIC SERVICE CONTRACTORS, INC. and RICARDO F.
DEL ROSARIO, Petitioners,
vs.
EQUITABLE PCI BANK (formerly THE PHILIPPINE
COMMERCIAL INTERNATIONAL BANK), Respondent.
DECISION
CARPIO, J.:
The Case
Pan Pacific Service Contractors, Inc. and Ricardo F. Del Rosario
(petitioners) filed this Petition for Review1assailing the Court of
Appeals (CA) Decision2 dated 30 June 2005 in CA-G.R. CV No.
63966 as well as the Resolution3 dated 5 October 2005 denying
the Motion for Reconsideration. In the assailed decision, the CA
modified the 12 April 1999 Decision4 of the Regional Trial Court of
Makati City, Branch 59 (RTC) by ordering Equitable PCI
Bank5 (respondent) to pay petitioners P1,516,015.07 with interest
at the legal rate of 12% per annum starting 6 May 1994 until the
amount is fully paid.
The Facts
Pan Pacific Service Contractors, Inc. (Pan Pacific) is engaged in
contracting mechanical works on airconditioning system. On 24
November 1989, Pan Pacific, through its President, Ricardo F. Del
Rosario (Del Rosario), entered into a contract of mechanical works
(Contract) with respondent for P20,688,800. Pan Pacific and
respondent also agreed on nine change orders for P2,622,610.30.
Thus, the total consideration for the whole project
wasP23,311,410.30.6 The Contract stipulated, among others, that
Pan Pacific shall be entitled to a price adjustment in case of
increase in labor costs and prices of materials under paragraphs
70.17 and 70.28 of the "General Conditions for the Construction of
PCIB Tower II Extension" (the escalation clause).9
Pursuant to the contract, Pan Pacific commenced the mechanical
works in the project site, the PCIB Tower II extension building in
Makati City. The project was completed in June 1992. Respondent
accepted the project on 9 July 1992.10
In 1990, labor costs and prices of materials escalated. On 5 April
1991, in accordance with the escalation clause, Pan Pacific
claimed a price adjustment of P5,165,945.52. Respondents
appointed project engineer, TCGI Engineers, asked for a reduction
in the price adjustment. To show goodwill, Pan Pacific reduced the
price adjustment to P4,858,548.67.11
On 28 April 1992, TCGI Engineers recommended to respondent
that the price adjustment should be pegged atP3,730,957.07.
TCGI Engineers based their evaluation of the price adjustment on
the following factors:
1. Labor Indices of the Department of Labor and
Employment.
2. Price Index of the National Statistics Office.
PD 1594 and its Implementing Rules and Regulations as
amended, 15 March 1991.
Shipping Documents submitted by PPSCI.
Sub-clause 70.1 of the General Conditions of the Contract
Documents.12
Pan Pacific contended that with this recommendation, respondent
was already estopped from disclaiming liability of at
least P3,730,957.07 in accordance with the escalation clause.13
Due to the extraordinary increases in the costs of labor and
materials, Pan Pacifics operational capital was becoming
inadequate for the project. However, respondent withheld the
payment of the price adjustment under the escalation clause
despite Pan Pacifics repeated demands.14 Instead, respondent
offered Pan Pacific a loan of P1.8 million. Against its will and on
the strength of respondents promise that the price adjustment
would be released soon, Pan Pacific, through Del Rosario, was
constrained to execute a promissory note in the amount ofP1.8
million as a requirement for the loan. Pan Pacific also posted a
surety bond. The P1.8 million was released directly to laborers and
suppliers and not a single centavo was given to Pan Pacific.15
Pan Pacific made several demands for payment on the price
adjustment but respondent merely kept on promising to release the
same. Meanwhile, the P1.8 million loan matured and respondent
demanded payment plus interest and penalty. Pan Pacific refused
to pay the loan. Pan Pacific insisted that it would not have incurred
the loan if respondent released the price adjustment on time. Pan
Pacific alleged that the promissory note did not express the true
agreement of the parties. Pan Pacific maintained that the P1.8
million was to be considered as an advance payment on the price
adjustment. Therefore, there was really no consideration for the
promissory note; hence, it is null and void from the beginning. 16
Respondent stood firm that it would not release any amount of the
price adjustment to Pan Pacific but it would offset the price
adjustment with Pan Pacifics outstanding balance
of P3,226,186.01, representing the loan, interests, penalties and
collection charges.17
Pan Pacific refused the offsetting but agreed to receive the
reduced amount of P3,730,957.07 as recommended by the TCGI
Engineers for the purpose of extrajudicial settlement, less P1.8
million and P414,942 as advance payments.18
On 6 May 1994, petitioners filed a complaint for declaration of
nullity/annulment of the promissory note, sum of money, and
damages against the respondent with the RTC of Makati City,
Branch 59. On 12 April 1999, the RTC rendered its decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiffs and against the defendant as follows:
1. Declaring the promissory note (Exhibit "B") null and
void;
Ordering the defendant to pay the plaintiffs the following
amounts:
a. P1,389,111.10 representing unpaid balance
of the adjustment price, with interest thereon at
the legal rate of twelve (12%) percent per
annum starting May 6, 1994, the date when the
complaint was filed, until the amount is fully
paid;
P100,000.00 representing moral
damages;
P50,000.00 representing exemplary
damages; and
 P50,000.00 as and for attorneys fees.
2. Dismissing defendants counterclaim, for lack
of merit; and
With costs against the defendant.
SO ORDERED.19
On 23 May 1999, petitioners partially appealed the RTC Decision
to the CA. On 26 May 1999, respondent appealed the entire RTC
Decision for being contrary to law and evidence. In sum, the
appeals of the parties with the CA are as follows:
1. With respect to the petitioners, whether the RTC erred
in deducting the amount of P126,903.97 from the
balance of the adjusted price and in awarding only 12%
annual interest on the amount due, instead of the bank
loan rate of 18% compounded annually beginning
September 1992.
2. With respect to respondent, whether the RTC erred in
declaring the promissory note void and in awarding moral
and exemplary damages and attorneys fees in favor of
petitioners and in dismissing its counterclaim.
In its decision dated 30 June 2005, the CA modified the RTC
decision, with respect to the principal amount due to petitioners.
The CA removed the deduction of P126,903.97 because it
represented the final payment on the basic contract price. Hence,
the CA ordered respondent to pay P1,516,015.07 to petitioners,
with interest at the legal rate of 12% per annum starting 6 May
1994.20
On 26 July 2005, petitioners filed a Motion for Partial
Reconsideration seeking a reconsideration of the CAs Decision
imposing the legal rate of 12%. Petitioners claimed that the interest
rate applicable should be the 18% bank lending rate. Respondent
likewise filed a Motion for Reconsideration of the CAs decision. In
a Resolution dated 5 October 2005, the CA denied both motions.
Aggrieved by the CAs Decision, petitioners elevated the case
before this Court.
The Issue
Petitioners submit this sole issue for our consideration: Whether
the CA, in awarding the unpaid balance of the price adjustment,
erred in fixing the interest rate at 12% instead of the 18% bank
lending rate.
Ruling of the Court
We grant the petition.
This Court notes that respondent did not appeal the decision of the
CA. Hence, there is no longer any issue as to the principal amount
of the unpaid balance on the price adjustment, which the CA
correctly computed atP1,516,015.07. The only remaining issue is
the interest rate applicable for respondents delay in the payment
of the balance of the price adjustment.
The CA denied petitioners claim for the application of the bank
lending rate of 18% compounded annually reasoning, to wit:
Anent the 18% interest rate compounded annually, while it is true
that the contract provides for an interest at the current bank
lending rate in case of delay in payment by the Owner, and the
promissory note charged an interest of 18%, the said proviso does
not authorize plaintiffs to unilaterally raise the interest rate without
the other partys consent. Unlike their request for price adjustment
on the basic contract price, plaintiffs never informed nor sought the
approval of defendant for the imposition of 18% interest on the
adjusted price. To unilaterally increase the interest rate of the
adjusted price would be violative of the principle of mutuality of
contracts. Thus, the Court maintains the legal rate of twelve
percent per annum starting from the date of judicial demand.
Although the contract provides for the period when the
recommendation of the TCGI Engineers as to the price adjustment
would be binding on the parties, it was established, however, that
part of the adjusted price demanded by plaintiffs was already
disbursed as early as 28 February 1992 by defendant bank to their
suppliers and laborers for their account.21
In this appeal, petitioners allege that the contract between the
parties consists of two parts, the Agreement 22 and the General
Conditions,23 both of which provide for interest at the bank lending
rate on any unpaid amount due under the contract. Petitioners
further claim that there is nothing in the contract which requires the
consent of the respondent to be given in order that petitioners can
charge the bank lending rate.24 Specifically, petitioners invoke
Section 2.5 of the Agreement and Section 60.10 of the General
Conditions as follows:
Agreement
2.5 If any payment is delayed, the CONTRACTOR may charge
interest thereon at the current bank lending rates, without prejudice
to OWNERS recourse to any other remedy available under
existing law.25
General Conditions
60.10 Time for payment
The amount due to the Contractor under any interim certificate
issued by the Engineer pursuant to this Clause, or to any term of
the Contract, shall, subject to clause 47, be paid by the Owner to
the Contractor within 28 days after such interim certificate has
been delivered to the Owner, or, in the case of the Final Certificate
referred to in Sub-Clause 60.8, within 56 days, after such Final
Certificate has been delivered to the Owner. In the event of the
failure of the Owner to make payment within the times stated, the
Owner shall pay to the Contractor interest at the rate based on
banking loan rates prevailing at the time of the signing of the
contract upon all sums unpaid from the date by which the same
should have been paid. The provisions of this Sub-Clause are
without prejudice to the Contractors entitlement under Clause
69.26 (Emphasis supplied)
Petitioners thus submit that it is automatically entitled to the bank
lending rate of interest from the time an amount is determined to
be due thereto, which respondent should have paid. Therefore, as
petitioners have already proven their entitlement to the price
adjustment, it necessarily follows that the bank lending interest
rate of 18% shall be applied.27
On the other hand, respondent insists that under the provisions of
70.1 and 70.2 of the General Conditions, it is stipulated that any
additional cost shall be determined by the Engineer and shall be
added to the contract price after due consultation with the Owner,
herein respondent. Hence, there being no prior consultation with
the respondent regarding the additional cost to the basic contract
price, it naturally follows that respondent was never consulted or
informed of the imposition of 18% interest rate compounded
annually on the adjusted price.28
A perusal of the assailed decision shows that the CA made a
distinction between the consent given by the owner of the project
for the liability for the price adjustments, and the consent for the
imposition of the bank lending rate. Thus, while the CA held that
petitioners consulted respondent for price adjustment on the basic
contract price, petitioners, nonetheless, are not entitled to the
imposition of 18% interest on the adjusted price, as petitioners
never informed or sought the approval of respondent for such
imposition.29
We disagree.
It is settled that the agreement or the contract between the parties
is the formal expression of the parties rights, duties, and
obligations. It is the best evidence of the intention of the parties.
Thus, when the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon
and there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the
written agreement.30
The escalation clause of the contract provides:
CHANGES IN COST AND LEGISLATION
70.1 Increase or Decrease of Cost
There shall be added to or deducted from the Contract Price such
sums in respect of rise or fall in the cost of labor and/or materials
or any other matters affecting the cost of the execution of the
Works as may be determined.
70.2 Subsequent Legislation
If, after the date 28 days prior to the latest date of submission of
tenders for the Contract there occur in the country in which the
Works are being or are to be executed changes to any National or
State Statute, Ordinance, Decree or other Law or any regulation or
bye-law (sic) of any local or other duly constituted authority, or the
introduction of any such State Statute, Ordinance, Decree, Law,
regulation or bye-law (sic) which causes additional or reduced cost
to the contractor, other than under Sub-Clause 70.1, in the
execution of the Contract, such additional or reduced cost shall,
after due consultation with the Owner and Contractor, be
determined by the Engineer and shall be added to or deducted
from the Contract Price and the Engineer shall notify the
Contractor accordingly, with a copy to the Owner.31
In this case, the CA already settled that petitioners consulted
respondent on the imposition of the price adjustment, and held
respondent liable for the balance of P1,516,015.07. Respondent
did not appeal from the decision of the CA; hence, respondent is
estopped from contesting such fact.
However, the CA went beyond the intent of the parties by requiring
respondent to give its consent to the imposition of interest before
petitioners can hold respondent liable for interest at the current
bank lending rate. This is erroneous. A review of Section 2.6 of the
Agreement and Section 60.10 of the General Conditions shows
that the consent of the respondent is not needed for the imposition
of interest at the current bank lending rate, which occurs
upon any delay in payment.
When the terms of a contract are clear and leave no doubt as to
the intention of the contracting parties, the literal meaning of its
stipulations governs. In these cases, courts have no authority to
alter a contract by construction or to make a new contract for the
parties. The Courts duty is confined to the interpretation of the
contract which the parties have made for themselves without
regard to its wisdom or folly as the court cannot supply material
stipulations or read into the contract words which it does not
contain. It is only when the contract is vague and ambiguous that
courts are permitted to resort to construction of its terms and
determine the intention of the parties.32
The escalation clause must be read in conjunction with Section 2.5
of the Agreement and Section 60.10 of the General Conditions
which pertain to the time of payment. Once the parties agree on
the price adjustment after due consultation in compliance with the
provisions of the escalation clause, the agreement is in effect an
amendment to the original contract, and gives rise to the liability of
respondent to pay the adjusted costs. Under Section 60.10 of the
General Conditions, the respondent shall pay such liability to the
petitioner within 28 days from issuance of the interim certificate.
Upon respondents failure to pay within the time provided (28
days), then it shall be liable to pay the stipulated interest.1avvphi1
This is the logical interpretation of the agreement of the parties on
the imposition of interest. To provide a contrary interpretation, as
one requiring a separate consent for the imposition of the
stipulated interest, would render the intentions of the parties
nugatory.
Article 1956 of the Civil Code, which refers to monetary interest,
specifically mandates that no interest shall be due unless it has
been expressly stipulated in writing. Therefore, payment of
monetary interest is allowed only if:
(1) there was an express stipulation for the payment of
interest; and
(2) the agreement for the payment of interest was
reduced in writing. The concurrence of the two conditions
is required for the payment of monetary interest.33
We agree with petitioners interpretation that in case of default, the
consent of the respondent is not needed in order to impose
interest at the current bank lending rate.
Applicable Interest Rate
Under Article 2209 of the Civil Code, the appropriate measure for
damages in case of delay in discharging an obligation consisting of
the payment of a sum of money is the payment of penalty interest
at the rate agreed upon in the contract of the parties. In the
absence of a stipulation of a particular rate of penalty interest,
payment of additional interest at a rate equal to the regular
monetary interest becomes due and payable. Finally, if no regular
interest had been agreed upon by the contracting parties, then the
damages payable will consist of payment of legal interest which is
6%, or in the case of loans or forbearances of money, 12% per
annum.34 It is only when the parties to a contract have failed to fix
the rate of interest or when such amount is unwarranted that the
Court will apply the 12% interest per annum on a loan or
forbearance of money.35
The written agreement entered into between petitioners and
respondent provides for an interest at the current bank lending rate
in case of delay in payment and the promissory note charged an
interest of 18%.
To prove petitioners entitlement to the 18% bank lending rate of
interest, petitioners presented the promissory note 36 prepared by
respondent bank itself. This promissory note, although declared
void by the lower courts because it did not express the real
intention of the parties, is substantial proof that the bank lending
rate at the time of default was 18% per annum. Absent any
evidence of fraud, undue influence or any vice of consent
exercised by petitioners against the respondent, the interest rate
agreed upon is binding on them.37
WHEREFORE, we GRANT the petition. We SET ASIDE the
Decision and Resolution of the Court of Appeals in CA-G.R. CV
No. 63966. We ORDER respondent to pay
petitioners P1,516,015.07 with interest at the bank lending rate of
18% per annum starting 6 May 1994 until the amount is fully paid.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 174978 July 31, 2013
SALLY YOSHIZAKI, Petitioner,
vs.
JOY TRAINING CENTER OF AURORA, INC., Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari 1 filed by petitioner
Sally Yoshizaki to challenge the February 14, 2006 Decision 2 and
the October 3, 2006 Resolution3 of the Court of Appeals (CA) in
CA-G.R. CV No. 83773.
The Factual Antecedents
Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a
non-stock, non-profit religious educational institution. It was the
registered owner of a parcel of land and the building thereon (real
properties) located in San Luis Extension Purok No. 1, Barangay
Buhangin, Baler, Aurora. The parcel of land was designated as Lot
No. 125-L and was covered by Transfer Certificate of Title (TCT)
No. T-25334.4
On November 10, 1998, the spouses Richard and Linda Johnson
sold the real properties, a Wrangler jeep, and other personal
properties in favor of the spouses Sally and Yoshio Yoshizaki. On
the same date, a Deed of Absolute Sale5 and a Deed of Sale of
Motor Vehicle6 were executed in favor of the spouses Yoshizaki.
The spouses Johnson were members of Joy Trainings board of
trustees at the time of sale. On December 7, 1998, TCT No. T-
25334 was cancelled and TCT No. T-260527 was issued in the
name of the spouses Yoshizaki.
On December 8, 1998, Joy Training, represented by its Acting
Chairperson Reuben V. Rubio, filed an action for the Cancellation
of Sales and Damages with prayer for the issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction against the
spouses Yoshizaki and the spouses Johnson before the Regional
Trial Court of Baler, Aurora (RTC).8 On January 4, 1999, Joy
Training filed a Motion to Amend Complaint with the attached
Amended Complaint. The amended complaint impleaded Cecilia
A. Abordo, officer-in-charge of the Register of Deeds of Baler,
Aurora, as additional defendant. The RTC granted the motion on
the same date.9
In the complaint, Joy Training alleged that the spouses Johnson
sold its properties without the requisite authority from the board of
directors.10 It assailed the validity of a board resolution dated
September 1, 199811 which purportedly granted the spouses
Johnson the authority to sell its real properties. It averred that only
a minority of the board, composed of the spouses Johnson and
Alexander Abadayan, authorized the sale through the resolution. It
highlighted that the Articles of Incorporation provides that the
board of trustees consists of seven members, namely: the spouses
Johnson, Reuben, Carmencita Isip, Dominador Isip, Miraflor
Bolante, and Abelardo Aquino.12
Cecilia and the spouses Johnson were declared in default for their
failure to file an Answer within the reglementary period.13 On the
other hand, the spouses Yoshizaki filed their Answer with
Compulsory Counterclaims on June 23, 1999. They claimed that
Joy Training authorized the spouses Johnson to sell the parcel of
land. They asserted that a majority of the board of trustees
approved the resolution. They maintained that the actual members
of the board of trustees consist of five members, namely: the
spouses Johnson, Reuben, Alexander, and Abelardo. Moreover,
Connie Dayot, the corporate secretary, issued a certification dated
February 20, 199814 authorizing the spouses Johnson to act on
Joy Trainings behalf. Furthermore, they highlighted that the
Wrangler jeep and other personal properties were registered in the
name of the spouses Johnson.15 Lastly, they assailed the RTCs
jurisdiction over the case. They posited that the case is an intra-
corporate dispute cognizable by the Securities and Exchange
Commission (SEC).16
After the presentation of their testimonial evidence, the spouses
Yoshizaki formally offered in evidence photocopies of the
resolution and certification, among others.17 Joy Training objected
to the formal offer of the photocopied resolution and certification on
the ground that they were not the best evidence of their
contents.18 In an Order19 dated May 18, 2004, the RTC denied the
admission of the offered copies.
The RTC Ruling
The RTC ruled in favor of the spouses Yoshizaki. It found that Joy
Training owned the real properties. However, it held that the sale
was valid because Joy Training authorized the spouses Johnson to
sell the real properties. It recognized that there were only five
actual members of the board of trustees; consequently, a majority
of the board of trustees validly authorized the sale. It also ruled
that the sale of personal properties was valid because they were
registered in the spouses Johnsons name.20
Joy Training appealed the RTC decision to the CA.
The CA Ruling
The CA upheld the RTCs jurisdiction over the case but reversed
its ruling with respect to the sale of real properties. It maintained
that the present action is cognizable by the RTC because it
involves recovery of ownership from third parties.
It also ruled that the resolution is void because it was not approved
by a majority of the board of trustees. It stated that under Section
25 of the Corporation Code, the basis for determining the
composition of the board of trustees is the list fixed in the articles
of incorporation. Furthermore, Section 23 of the Corporation Code
provides that the board of trustees shall hold office for one year
and until their successors are elected and qualified. Seven
trustees constitute the board since Joy Training did not hold an
election after its incorporation.
The CA did not also give any probative value to the certification. It
stated that the certification failed to indicate the date and the
names of the trustees present in the meeting. Moreover, the
spouses Yoshizaki did not present the minutes that would prove
that the certification had been issued pursuant to a board
resolution.21 The CA also denied22 the spouses Yoshizakis motion
for reconsideration, prompting Sally23 to file the present petition.
The Petition
Sally avers that the RTC has no jurisdiction over the case. She
points out that the complaint was principally for the nullification of a
corporate act. The transfer of the SECs original and exclusive
jurisdiction to the RTC24 does not have any retroactive application
because jurisdiction is a substantive matter.
She argues that the spouses Johnson were authorized to sell the
parcel of land and that she was a buyer in good faith because she
merely relied on TCT No. T-25334. The title states that the
spouses Johnson are Joy Trainings representatives.
She also argues that it is a basic principle that a party dealing with
a registered land need not go beyond the certificate of title to
determine the condition of the property. In fact, the resolution and
the certification are mere reiterations of the spouses Johnsons
authority in the title to sell the real properties. She further claims
that the resolution and the certification are not even necessary to
clothe the spouses Johnson with the authority to sell the disputed
properties. Furthermore, the contract of agency was subsisting at
the time of sale because Section 108 of Presidential Decree No.
(PD) 1529 requires that the revocation of authority must be
approved by a court of competent jurisdiction and no revocation
was reflected in the certificate of title.25
 The Case for the Respondent
In its Comment26 and Memorandum,27 Joy Training takes the
opposite view that the RTC has jurisdiction over the case. It posits
that the action is essentially for recovery of property and is
therefore a case cognizable by the RTC. Furthermore, Sally is
estopped from questioning the RTCs jurisdiction because she
seeks to reinstate the RTC ruling in the present case.
Joy Training maintains that it did not authorize the spouses
Johnson to sell its real properties. TCT No. T-25334 does not
specifically grant the authority to sell the parcel of land to the
spouses Johnson. It further asserts that the resolution and the
certification should not be given any probative value because they
were not admitted in evidence by the RTC. It argues that the
resolution is void for failure to comply with the voting requirements
under Section 40 of the Corporation Code. It also posits that the
certification is void because it lacks material particulars.
The Issues
The case comes to us with the following issues:
1) Whether or not the RTC has jurisdiction over the
present case; and
2) Whether or not there was a contract of agency to sell
the real properties between Joy Training and the spouses
Johnson.
3) As a consequence of the second issue, whether or not
there was a valid contract of sale of the real properties
between Joy Training and the spouses Yoshizaki.
Our Ruling
We find the petition unmeritorious.
The RTC has jurisdiction over disputes concerning the application
of the Civil Code
Jurisdiction over the subject matter is the power to hear and
determine cases of the general class to which the proceedings
before a court belong.28 It is conferred by law. The allegations in
the complaint and the status or relationship of the parties
determine which court has jurisdiction over the nature of an
action.29 The same test applies in ascertaining whether a case
involves an intra-corporate controversy.30
The CA correctly ruled that the RTC has jurisdiction over the
present case. Joy Training seeks to nullify the sale of the real
properties on the ground that there was no contract of agency
between Joy Training and the spouses Johnson. This was beyond
the ambit of the SECs original and exclusive jurisdiction prior to
the enactment of Republic Act No. 8799 which only took effect on
August 3, 2000. The determination of the existence of a contract of
agency and the validity of a contract of sale requires the
application of the relevant provisions of the Civil Code. It is a well-
settled rule that "disputes concerning the application of the Civil
Code are properly cognizable by courts of general
jurisdiction."31 Indeed, no special skill requiring the SECs technical
expertise is necessary for the disposition of this issue and of this
case.
The Supreme Court may review questions of fact in a petition for
review on certiorari when the findings of fact by the lower courts
are conflicting
We are aware that the issues at hand require us to review the
pieces of evidence presented by the parties before the lower
courts. As a general rule, a petition for review on certiorari
precludes this Court from entertaining factual issues; we are not
duty-bound to analyze again and weigh the evidence introduced in
and considered by the lower courts. However, the present case
falls under the recognized exception that a review of the facts is
warranted when the findings of the lower courts are
conflicting.32 Accordingly, we will examine the relevant pieces of
evidence presented to the lower court.
There is no contract of agency between Joy Training and the
spouses Johnson to sell the parcel of land with its improvements
Article 1868 of the Civil Code defines a contract of agency as a
contract whereby a person "binds himself to render some service
or to do something in representation or on behalf of another, with
the consent or authority of the latter." It may be express, or implied
from the acts of the principal, from his silence or lack of action, or
his failure to repudiate the agency, knowing that another person is
acting on his behalf without authority.
As a general rule, a contract of agency may be oral. However, it
must be written when the law requires a specific
form.33 Specifically, Article 1874 of the Civil Code provides that the
contract of agency must be written for the validity of the sale of a
piece of land or any interest therein. Otherwise, the sale shall be
void. A related provision, Article 1878 of the Civil Code, states that
special powers of attorney are necessary to convey real rights over
immovable properties.
The special power of attorney mandated by law must be one that
expressly mentions a sale or that includes a sale as a necessary
ingredient of the authorized act. We unequivocably declared in
Cosmic Lumber Corporation v. Court of Appeals34 that a special
power of attorneymust express the powers of the agent in clear
and unmistakable language for the principal to confer the right
upon an agent to sell real estate. When there is any reasonable
doubt that the language so used conveys such power, no such
construction shall be given the document. The purpose of the law
in requiring a special power of attorney in the disposition of
immovable property is to protect the interest of an unsuspecting
owner from being prejudiced by the unwarranted act of another
and to caution the buyer to assure himself of the specific
authorization of the putative agent.35
In the present case, Sally presents three pieces of evidence which
allegedly prove that Joy Training specially authorized the spouses
Johnson to sell the real properties: (1) TCT No. T-25334, (2) the
resolution, (3) and the certification. We quote the pertinent portions
of these documents for a thorough examination of Sallys claim.
TCT No. T-25334, entered in the Registry of Deeds on March 5,
1998, states:
A parcel of land x x x is registered in accordance with the
provisions of the Property Registration Decree in the name of JOY
TRAINING CENTER OF AURORA, INC., Rep. by Sps. RICHARD
A. JOHNSON and LINDA S. JOHNSON, both of legal age, U.S.
Citizen, and residents of P.O. Box 3246, Shawnee, Ks 66203,
U.S.A.36(emphasis ours)
On the other hand, the fifth paragraph of the certification provides:
Further, Richard A. and Linda J. Johnson were given FULL
AUTHORITY for ALL SIGNATORY purposes for the corporation on
ANY and all matters and decisions regarding the property and
ministry here. They will follow guidelines set forth according to their
appointment and ministerial and missionary training and in that,
they will formulate and come up with by-laws which will address
and serve as governing papers over the center and corporation.
They are to issue monthly and quarterly statements to all members
of the corporation.37 (emphasis ours)
The resolution states:
We, the undersigned Board of Trustees (in majority) have
authorized the sale of land and building owned by spouses
Richard A. and Linda J. Johnson (as described in the title SN No.
5102156 filed with the Province of Aurora last 5th day of March,
1998. These proceeds are going to pay outstanding loans against
the project and the dissolution of the corporation shall follow the
sale. This is a religious, non-profit corporation and no profits or
stocks are issued.38 (emphasis ours)
The above documents do not convince us of the existence of the
contract of agency to sell the real properties. TCT No. T-25334
merely states that Joy Training is represented by the spouses
Johnson. The title does not explicitly confer to the spouses
Johnson the authority to sell the parcel of land and the building
thereon. Moreover, the phrase "Rep. by Sps. RICHARD A.
JOHNSON and LINDA S. JOHNSON"39 only means that the
spouses Johnson represented Joy Training in land registration.
The lower courts should not have relied on the resolution and the
certification in resolving the case.1wphi1 The spouses Yoshizaki
did not produce the original documents during trial. They also
failed to show that the production of pieces of secondary evidence
falls under the exceptions enumerated in Section 3, Rule 130 of
the Rules of Court.40 Thus, the general rule that no evidence
shall be admissible other than the original document itself when
the subject of inquiry is the contents of a document applies. 41
Nonetheless, if only to erase doubts on the issues surrounding this
case, we declare that even if we consider the photocopied
resolution and certification, this Court will still arrive at the same
conclusion.
The resolution which purportedly grants the spouses Johnson a
special power of attorney is negated by the phrase "land and
building owned by spouses Richard A. and Linda J.
Johnson."42 Even if we disregard such phrase, the resolution must
be given scant consideration. We adhere to the CAs position that
the basis for determining the board of trustees composition is the
trustees as fixed in the articles of incorporation and not the actual
members of the board. The second paragraph of Section 2543 of
the Corporation Code expressly provides that a majority of the
number of trustees as fixed in the articles of incorporation shall
constitute a quorum for the transaction of corporate business.
Moreover, the certification is a mere general power of attorney
which comprises all of Joy Trainings business.44Article 1877 of the
Civil Code clearly states that "an agency couched in general terms
comprises only acts of administration, even if the principal should
state that he withholds no power or that the agent may execute
such acts as he may consider appropriate, or even though the
agency should authorize a general and unlimited management."45
The contract of sale is unenforceable
Necessarily, the absence of a contract of agency renders the
contract of sale unenforceable;46 Joy Training effectively did not
enter into a valid contract of sale with the spouses Yoshizaki. Sally
cannot also claim that she was a buyer in good faith. She
misapprehended the rule that persons dealing with a registered
land have the legal right to rely on the face of the title and to
dispense with the need to inquire further, except when the party
concerned has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such
inquiry.47 This rule applies when the ownership of a parcel of land
is disputed and not when the fact of agency is contested.
At this point, we reiterate the established principle that persons
dealing with an agent must ascertain not only the fact of agency,
but also the nature and extent of the agents authority.48 A third
person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or
the instructions as regards the agency.49 The basis for agency is
representation and a person dealing with an agent is put upon
inquiry and must discover on his own peril the authority of the
agent.50 Thus, Sally bought the real properties at her own risk; she
bears the risk of injury occasioned by her transaction with the
spouses Johnson.
WHEREFORE, premises considered, the assailed Decision dated
February 14, 2006 and Resolution dated October 3, 2006 of the
Court of Appeals are hereby AFFIRMED and the petition is hereby
DENIED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 179781 April 7, 2010
SPOUSES BASILIO and NORMA HILAGA, Petitioners,
vs.
RURAL BANK OF ISULAN (Cotabato, Inc., as represented by
its Manager), Respondent.
DECISION
VILLARAMA, JR., J.:
Petitioners appeal from the Decision1 dated May 25, 2007 and
Resolution2 dated August 6, 2007 of the Court of Appeals (CA) in
C.A.-G.R. CV No. 81979 which had reversed the August 8, 2003
Judgment3 of the Regional Trial Court of Surallah, South Cotabato,
Branch 26 in Civil Case No. 666-N for "Redemption of Foreclosed
Mortgaged Property Under [Act No.] 3135." The appellate court
held that petitioners right to redeem the foreclosed property from
the respondent bank had expired.
The following facts are established:
Petitioners Basilio and Norma B. Hilaga were the owners of a
parcel of land, identified as Lot No. 172-A, Pls-212-D-7, located at
Barrio Lopez Jaena, Municipality of Norala, Province of South
Cotabato and containing an area of 46,868 square meters, more or
less.
On March 16, 1970, petitioners obtained a loan from respondent
Rural Bank of Isulan (Cotabato) Inc., in the amount of P2,500.00.
To secure the loan, they executed a Real Estate Mortgage 4 over
the above-mentioned property which was then covered only by Tax
Declaration No. 5537.5 When petitioners failed to pay their
obligation when it became due on March 19, 1971, the respondent
bank initiated foreclosure proceedings. The subject property was
sold at a public auction by the Provincial Sheriff on April 20, 1977
and a Certificate of Extrajudicial Sale6 was issued in favor of the
Rural Bank of Isulan (Cotabato) Inc. as the highest bidder. The
respondent bank then took possession of the foreclosed property.
Meanwhile, unknown to respondent bank, a Free Patent
title7 (Original Certificate of Title No. P-19766) had been issued in
favor of petitioners on August 4, 1976 or before the foreclosure
sale.
On September 21, 1994, or more than seventeen (17) years after
the foreclosure sale, petitioner Basilio Hilaga sent a letter 8 to the
respondent banks lawyer, the late Atty. Ismail Arceno, conveying
his desire to redeem the subject property. When the letter
remained unanswered, petitioners, through their counsel, again
sent a letter9dated May 4, 1999, seeking to redeem the foreclosed
property. The second letter, however, also remained unheeded.
Thus, on June 3, 1999, petitioners filed a
complaint10 for Redemption of Foreclosed Mortgaged Property
Under [Act No. 3135] before the Regional Trial Court of Surallah,
South Cotabato, Branch 26, seeking to redeem the subject
property from the respondent bank under the provisions of Act No.
3135. In their complaint, petitioners alleged that the mortgage and
subsequent foreclosure of the subject property had not been
annotated on the title nor registered with the Register of Deeds.
Also, no annotation and consolidation of ownership was made in
favor of the respondent bank. Thus, the one (1)-year redemption
period under Act No. 3135, which commences from the date of
registration of the sale, has not yet started. They insisted that,
indeed, their right of redemption has not yet expired because
under Section 119 of Commonwealth Act No. 141 or the Public
Land Act, a homesteader whose homestead has been sold at a
public auction by virtue of an extrajudicial foreclosure, may
repurchase said land within five (5) years from the date of
registration of the sale. Thus, they can still exercise their right of
redemption. They signified their willingness to redeem or
repurchase the foreclosed property by depositing the amount
of P10,000.00 with the court.
In its Answer with Counterclaim,11 the respondent bank averred
that when the real estate mortgage in its favor was executed, the
parcel of land was merely covered by a tax declaration. That
unknown to the respondent bank, petitioners proceeded to apply
for and cause the issuance in 1976 of a free patent and torrens
title to the land; hence, they are estopped to claim that the parcel
of land mortgaged is covered by a free patent and torrens title.
They likewise cannot avail of the benefits afforded to a grantee of
a public land under the Homestead and Free Patent Laws because
they violated the terms and conditions of their application to avail
of a grant by homestead or free patent when they mortgaged the
land.1avvphi1
As aforesaid, the trial court rendered judgment in favor of
petitioners. The trial court ruled that because the certificate of sale
was not registered, petitioners can still redeem the subject
property. The dispositive portion of the trial courts decision reads--
IN VIEW OF THE FOREGOING PREMISES, judgment is hereby
rendered in favor of the Plaintiffs, thereby ordering the defendant
Bank:
1) to allow the plaintiffs to exercise their right of
redemption under Act 3135 over the foreclosed property
described above in the amount corresponding to the
principal obligation, plus the corresponding interest
accruing from the date of the filing of this case[; and]
2) to pay attorneys fees in the amount of FIVE
THOUSAND PESOS (PH 5,000.00).
SO ORDERED. 12
On appeal, the CA reversed the trial court. According to the CA,
the right of petitioners to redeem their foreclosed property can only
be exercised within two (2) years from the date of foreclosure, as
provided under Republic Act No. 72013 or the Rural Banks Act, as
amended by Republic Act No. 2670. The CA also ruled that
petitioners are guilty of laches.
On August 6, 2007, the CA denied petitioners motion for
reconsideration.
Hence, this appeal.
Petitioners alleged that--
I In Sta. Ignacia Rural Bank, Inc. v. Court of Appeals,15 we
THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR OF LAW IN HOLDING THAT THE APPLICABLE LAW IS
ACT NO. 3135, AS AMENDED BY ACT NO. 4118 IN
CONJUNCTION WITH REPUBLIC ACT NO. 720 AS AMENDED
BY REPUBLIC ACT NO. 2670 (RURAL BANK ACT).
II
THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR OF LAW AND GRAVE ABUSE OF DISCRETION IN
HOLDING THAT PETITIONERS HAS ONLY TWO YEARS TO
REDEEM THEIR PROPERTY FROM THE ISSUANCE OF
CERTIFICATE OF SALE AFTER THE SAME WAS
FORECLOSED.
III
THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR OF LAW AND GRAVE ABUSE OF DISCRETION IN
DECLARING THAT PETITIONERS ARE GUILTY OF LACHES.14
Essentially, the issue is whether petitioners can still redeem their
foreclosed property.
Petitioners assail the CAs ruling that they only have two (2) years
from the time the certificate of sale was issued to the respondent
bank to redeem the property. Petitioners submit that they can still
redeem their foreclosed property from respondent bank since
under the provisions of Act No. 3135, as amended, the one (1)-
year redemption period should start from the date of registration of
the certificate of sale with the Register of Deeds.
They admit that when the property was mortgaged, the property
was covered by a mere tax declaration. However, they point out
that even though a free patent title was later issued to them,
respondent bank still opted to foreclose the property under Act No.
3135, as amended, and not under Republic Act No. 720 or
the Rural Banks Act, nor under Act No. 3344 or the Spanish
Mortgage Law. Thus, under the provisions of Act No. 3135, they
have one (1) year from the date of the registration of the sale to
redeem the mortgaged property. Because no registration of the
sale was effected, they can still redeem the property from the
respondent bank.
The petition has no merit.
Section 5 of Republic Act No. 720, as amended by Republic Act
Nos. 2670 and 5939, specifically provides for the redemption
period for lands foreclosed by rural banks. It provides in part as
follows:
Sec. 5. x x x
Loans may be granted by rural banks on the security of lands
without Torrens titles where the owner of private property can show
five years or more of peaceful, continuous and uninterrupted
possession in the concept of an owner; x x x or of homesteads or
free patent lands pending the issuance of titles but already
approved, the provisions of any law or regulations to the contrary
notwithstanding: Provided, That when the corresponding titles
are issued the same shall be delivered to the register of deeds
of the province where such lands are situated for the
annotation of the encumbrance: x x x
x x x Provided, That when a homestead or free patent land is
foreclosed, the homesteader or free patent holder, as well as their
heirs shall have the right to redeem the same within two years
from the date of foreclosure in case of a land not covered by a
Torrens title or two years from the date of the registration of the
foreclosure in case of a land covered by a Torrens title x x x.
summarized the rules on redemption in the case of an extrajudicial
foreclosure of land acquired under our free patent or homestead
statutes as follows. If the land is mortgaged to a rural bank under
Republic Act No. 720, as amended, the mortgagor may redeem
the property within two (2) years from the date of foreclosure
or from the registration of the sheriffs certificate of sale at
such foreclosure if the property is not covered or is covered,
respectively, by a Torrens title. If the mortgagor fails to exercise
such right, he or his heirs may still repurchase the property within
five (5) years from the expiration of the two (2)-year redemption
period pursuant to Section 119 of the Public Land Act (C.A. No.
141). If the land is mortgaged to parties other than rural banks, the
mortgagor may redeem the property within one (1) year from the
registration of the certificate of sale pursuant to Act No. 3135. If he
fails to do so, he or his heirs may repurchase the property within
five (5) years from the expiration of the redemption period also Republic of the Philippines
pursuant to Section 119 of the Public Land Act. SUPREME COURT
Manila
In the present case, petitioners admit that when the property was
mortgaged, only the tax declaration was presented. Although a THIRD DIVISION
free patent title was subsequently issued in their favor on August 4,
1976, petitioners failed to inform the creditor rural bank of such G.R. No. 168289 March 22, 2010
issuance. As a result, the certificate of sale was not registered or
annotated on the free patent title. Petitioners are estopped from
THE MUNICIPALITY OF HAGONOY, BULACAN, represented by
redeeming the property based on the free patent title which was
the HON. FELIX V. OPLE, Municipal Mayor, and FELIX V.
not presented during the foreclosure sale nor delivered to the
OPLE, in his personal capacity, Petitioners,
Register of Deeds for annotation of the certificate of sale as
vs.
required under Section 5 of Republic Act No. 720, as amended.
HON. SIMEON P. DUMDUM, JR., in his capacity as the
Estoppel in pais arises when one, by his acts, representations or
Presiding Judge of the REGIONAL TRIAL COURT, BRANCH 7,
admissions, or by his own silence when he ought to speak out,
CEBU CITY; HON. CLERK OF COURT & EX-OFFICIO SHERIFF
intentionally or through culpable negligence, induces another to
of the REGIONAL TRIAL COURT of CEBU CITY; HON. CLERK
believe certain facts to exist and such other rightfully relies and
OF COURT & EX-OFFICIO SHERIFF of the REGIONAL TRIAL
acts on such belief, so that he will be prejudiced if the former is
COURT of BULACAN and his DEPUTIES; and EMILY ROSE GO
permitted to deny the existence of such facts.16
KO LIM CHAO, doing business under the name and style KD
SURPLUS, Respondents.
Petitioners cannot fault respondent for the non-registration of the
certificate of sale because petitioners did not inform the
DECISION
respondent bank that a Torrens title had already been acquired by
them on August 4, 1976. By their silence and inaction, petitioners
misled the respondent bank to believe that their only proof of PERALTA, J.:
ownership was the tax declaration. Thus, the two (2)-year
redemption period shall be reckoned from the date of the This is a Joint Petition1 under Rule 45 of the Rules of Court
foreclosure. Apropos is the CAs ruling on this matter: brought by the Municipality of Hagonoy, Bulacan and its former
chief executive, Mayor Felix V. Ople in his official and personal
It is undisputed that the foreclosed property was not yet covered capacity, from the January 31, 2005 Decision2 and the May 23,
by a Torrens title, being merely covered by a Tax Declaration, 2005 Resolution3 of the Court of Appeals in CA-G.R. SP No.
when appellees mortgaged their property. Clearly, the right of 81888. The assailed decision affirmed the October 20, 2003
appellees to redeem their foreclosed property can only be Order4 issued by the Regional Trial Court of Cebu City, Branch 7 in
exercised within two (2) years from the date of foreclosure, as Civil Case No. CEB-28587 denying petitioners motion to dismiss
provided for under R.A. No. 720, as amended by R.A. No. 2670. and motion to discharge/dissolve the writ of preliminary attachment
When the instant suit commenced on 31 May 1999, appellees right previously issued in the case. The assailed resolution denied
to redeem had already lapsed since they had only until 1979 to reconsideration.
exercise their right of redemption or within two (2) years from the
foreclosure proceedings in 1977.17 The case stems from a Complaint5 filed by herein private
respondent Emily Rose Go Ko Lim Chao against herein
For the same reason, petitioners assertion that they will have five petitioners, the Municipality of Hagonoy, Bulacan and its chief
(5) years from the date of registration of the sale to redeem the executive, Felix V. Ople (Ople) for collection of a sum of money
foreclosed property under Section 119 of the Public Land Act has and damages. It was alleged that sometime in the middle of the
no merit, the reckoning period for the redemption period being year 2000, respondent, doing business as KD Surplus and as such
properly from the date of sale. engaged in buying and selling surplus trucks, heavy equipment,
machinery, spare parts and related supplies, was contacted by
petitioner Ople. Respondent had entered into an agreement with
But even assuming arguendo that petitioners can avail of the five
petitioner municipality through Ople for the delivery of motor
(5)-year redemption period provided under Section 119 of
vehicles, which supposedly were needed to carry out certain
the Public Land Act, they still failed to exercise their right of
developmental undertakings in the municipality. Respondent
redemption within the reglementary period provided by law. As
claimed that because of Oples earnest representation that funds
mentioned earlier, Section 119 of said Act expressly provides that
had already been allocated for the project, she agreed to deliver
where the land involved is acquired as a homestead or under a
from her principal place of business in Cebu City twenty-one motor
free patent, if the mortgagor fails to exercise the right of
vehicles whose value totaled P5,820,000.00. To prove this, she
redemption, he or his heirs may still repurchase the property within
attached to the complaint copies of the bills of lading showing that
five (5) years from the expiration of the two (2)-year redemption
the items were consigned, delivered to and received by petitioner
period. The auction sale having been conducted on April 20, 1977,
municipality on different dates.6 However, despite having made
petitioners had until April 20, 1984 within which to redeem the
several deliveries, Ople allegedly did not heed respondents claim
mortgaged property. Since petitioner only filed the instant suit in
for payment. As of the filing of the complaint, the total obligation of
1999, their right to redeem had already lapsed. It took petitioners
petitioner had already totaled P10,026,060.13 exclusive of
twenty-two (22) years before instituting an action for redemption.
penalties and damages. Thus, respondent prayed for full payment
The considerable delay in asserting ones right before a court of
of the said amount, with interest at not less than 2% per month,
justice is strongly persuasive of the lack of merit in petitioners
plus P500,000.00 as damages for business losses, P500,000.00
claim, since it is human nature for a person to enforce his right
as exemplary damages, attorneys fees of P100,000.00 and the
when the same is threatened or invaded.18
costs of the suit.

WHEREFORE, the petition for review on certiorari is hereby

DENIED, for lack of merit. The Decision and Resolution of the
Court of Appeals dated May 25, 2007 and August 6, 2007,
respectively, in C.A.-G.R. CV No. 81979 are AFFIRMED.
With cost against the petitioners.
On February 13, 2003, the trial court issued an Order7 granting
respondents prayer for a writ of preliminary attachment
conditioned upon the posting of a bond equivalent to the amount of
the claim. On March 20, 2003, the trial court issued the Writ of
Preliminary Attachment8 directing the sheriff "to attach the estate,
real and personal properties" of petitioners.

SO ORDERED.
Instead of addressing private respondents allegations, petitioners
filed a Motion to Dismiss9 on the ground that the claim on which
the action had been brought was unenforceable under the statute
of frauds, pointing out that there was no written contract or
document that would evince the supposed agreement they entered
into with respondent. They averred that contracts of this nature,
before being undertaken by the municipality, would ordinarily be
subject to several preconditions such as a public bidding and prior
approval of the municipal council which, in this case, did not
obtain. From this, petitioners impress upon us the notion that no
contract was ever entered into by the local government with
respondent.10 To address the claim that respondent had made the
deliveries under the agreement, they advanced that the bills of
lading attached to the complaint were hardly probative, inasmuch
as these documents had been accomplished and handled
exclusively by respondent herself as well as by her employees and
agents.11
Petitioners also filed a Motion to Dissolve and/or Discharge the
Writ of Preliminary Attachment Already Issued,12invoking immunity
of the state from suit, unenforceability of the contract, and failure to
substantiate the allegation of fraud.13
On October 20, 2003, the trial court issued an Order14 denying the
two motions. Petitioners moved for reconsideration, but they were
denied in an Order15 dated December 29, 2003.
Believing that the trial court had committed grave abuse of
discretion in issuing the two orders, petitioners elevated the matter
to the Court of Appeals via a petition for certiorari under Rule 65. In
it, they faulted the trial court for not dismissing the complaint
despite the fact that the alleged contract was unenforceable under
the statute of frauds, as well as for ordering the filing of an answer
and in effect allowing private respondent to prove that she did
make several deliveries of the subject motor vehicles. Additionally,
it was likewise asserted that the trial court committed grave abuse
of discretion in not discharging/dissolving the writ of preliminary
attachment, as prayed for in the motion, and in effect disregarding
the rule that the local government is immune from suit.
On January 31, 2005, following assessment of the parties
arguments, the Court of Appeals, finding no merit in the petition,
upheld private respondents claim and affirmed the trial courts
order.16 Petitioners moved for reconsideration, but the same was
likewise denied for lack of merit and for being a mere scrap of
paper for having been filed by an unauthorized counsel.17 Hence,
this petition.
In their present recourse, which raises no matter different from
those passed upon by the Court of Appeals, petitioners ascribe
error to the Court of Appeals for dismissing their challenge against
the trial courts October 20 and December 29, 2003 Orders. Again,
they reason that the complaint should have been dismissed at the
first instance based on unenforceability and that the motion to
dissolve/discharge the preliminary attachment should have been
granted.18
Commenting on the petition, private respondent notes that with
respect to the Court of Appeals denial of thecertiorari petition, the
same was rightly done, as the fact of delivery may be properly and
adequately addressed at the trial of the case on the merits; and
that the dissolution of the writ of preliminary attachment was not
proper under the premises inasmuch as the application for the writ
sufficiently alleged fraud on the part of petitioners. In the same
breath, respondent laments that the denial of petitioners motion for
reconsideration was rightly done by the Court of Appeals, because
it raised no new matter that had not yet been addressed.19
After the filing of the parties respective memoranda, the case was
deemed submitted for decision.
We now rule on the petition.
To begin with, the Statute of Frauds found in paragraph (2), Article
1403 of the Civil Code,20 requires for enforceability certain
contracts enumerated therein to be evidenced by some note or
memorandum. The term "Statute of Frauds" is descriptive of
statutes that require certain classes of contracts to be in writing;
and that do not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulate the
formalities of the contract necessary to render it enforceable. 21
In other words, the Statute of Frauds only lays down the method
by which the enumerated contracts may be proved. But it does not
declare them invalid because they are not reduced to writing
inasmuch as, by law, contracts are obligatory in whatever form
they may have been entered into, provided all the essential
requisites for their validity are present.22 The object is to prevent
fraud and perjury in the enforcement of obligations depending, for
evidence thereof, on the unassisted memory of witnesses by
requiring certain enumerated contracts and transactions to be
evidenced by a writing signed by the party to be charged.23 The
effect of noncompliance with this requirement is simply that no
action can be enforced under the given contracts.24 If an action is
nevertheless filed in court, it shall warrant a dismissal under
Section 1(i),25 Rule 16 of the Rules of Court, unless there has
been, among others, total or partial performance of the obligation
on the part of either party.26
It has been private respondents consistent stand, since the
inception of the instant case that she has entered into a contract
with petitioners. As far as she is concerned, she has already
performed her part of the obligation under the agreement by
undertaking the delivery of the 21 motor vehicles contracted for by
Ople in the name of petitioner municipality. This claim is well
substantiated at least for the initial purpose of setting out a valid
cause of action against petitioners by copies of the bills of
lading attached to the complaint, naming petitioner municipality as
consignee of the shipment. Petitioners have not at any time
expressly denied this allegation and, hence, the same is binding
on the trial court for the purpose of ruling on the motion to dismiss.
In other words, since there exists an indication by way of allegation
that there has been performance of the obligation on the part of
respondent, the case is excluded from the coverage of the rule on
dismissals based on unenforceability under the statute of frauds,
and either party may then enforce its claims against the other.
No other principle in remedial law is more settled than that when a
motion to dismiss is filed, the material allegations of the complaint
are deemed to be hypothetically admitted.27 This hypothetical
admission, according to Viewmaster Construction Corporation v.
Roxas28 and Navoa v. Court of Appeals,29 extends not only to the
relevant and material facts well pleaded in the complaint, but also
to inferences that may be fairly deduced from them. Thus, where it
appears that the allegations in the complaint furnish sufficient
basis on which the complaint can be maintained, the same should
not be dismissed regardless of the defenses that may be raised by
the defendants.30 Stated differently, where the motion to dismiss is
predicated on grounds that are not indubitable, the better policy is
to deny the motion without prejudice to taking such measures as
may be proper to assure that the ends of justice may be served. 31
It is interesting to note at this point that in their bid to have the case
dismissed, petitioners theorize that there could not have been a
contract by which the municipality agreed to be bound, because it
was not shown that there had been compliance with the required
bidding or that the municipal council had approved the contract.
The argument is flawed. By invoking unenforceability under the
Statute of Frauds, petitioners are in effect acknowledging the
existence of a contract between them and private respondent
only, the said contract cannot be enforced by action for being non-
compliant with the legal requisite that it be reduced into writing.
Suffice it to say that while this assertion might be a viable defense
against respondents claim, it is principally a matter of evidence
that may be properly ventilated at the trial of the case on the
merits.
Verily, no grave abuse of discretion has been committed by the
trial court in denying petitioners motion to dismiss this case. The
Court of Appeals is thus correct in affirming the same.
We now address the question of whether there is a valid reason to
deny petitioners motion to discharge the writ of preliminary
attachment.
Petitioners, advocating a negative stance on this issue, posit that
as a municipal corporation, the Municipality of Hagonoy is immune
from suit, and that its properties are by law exempt from execution
and garnishment. Hence, they submit that not only was there an
error committed by the trial court in denying their motion to
dissolve the writ of preliminary attachment; they also advance that
it should not have been issued in the first place. Nevertheless, they
believe that respondent has not been able to substantiate her
allegations of fraud necessary for the issuance of the writ.32
Private respondent, for her part, counters that, contrary to
petitioners claim, she has amply discussed the basis for the
issuance of the writ of preliminary attachment in her affidavit; and
that petitioners claim of immunity from suit is negated by Section
22 of the Local Government Code, which vests municipal
corporations with the power to sue and be sued. Further, she
contends that the arguments offered by petitioners against the writ
of preliminary attachment clearly touch on matters that when ruled
upon in the hearing for the motion to discharge, would amount to a
trial of the case on the merits.33
The general rule spelled out in Section 3, Article XVI of the
Constitution is that the state and its political subdivisions may not
be sued without their consent. Otherwise put, they are open to suit
but only when they consent to it. Consent is implied when the
government enters into a business contract, as it then descends to
the level of the other contracting party; or it may be embodied in a
general or special law34 such as that found in Book I, Title I,
Chapter 2, Section 22 of the Local Government Code of 1991,
which vests local government units with certain corporate powers
one of them is the power to sue and be sued.
Be that as it may, a difference lies between suability and liability.
As held in City of Caloocan v. Allarde,35 where the suability of the
state is conceded and by which liability is ascertained judicially, the
state is at liberty to determine for itself whether to satisfy the
judgment or not. Execution may not issue upon such judgment,
because statutes waiving non-suability do not authorize the
seizure of property to satisfy judgments recovered from the action.
These statutes only convey an implication that the legislature will
recognize such judgment as final and make provisions for its full
satisfaction. Thus, where consent to be sued is given by general or
special law, the implication thereof is limited only to the resultant
verdict on the action before execution of the judgment.36
Traders Royal Bank v. Intermediate Appellate Court,37 citing
Commissioner of Public Highways v. San Diego,38 is instructive on
this point. In that case which involved a suit on a contract entered
into by an entity supervised by the Office of the President, the
Court held that while the said entity opened itself to suit by
entering into the subject contract with a private entity; still, the trial
court was in error in ordering the garnishment of its funds, which
were public in nature and, hence, beyond the reach of garnishment
and attachment proceedings. Accordingly, the Court ordered that
the writ of preliminary attachment issued in that case be lifted, and
that the parties be allowed to prove their respective claims at the
trial on the merits. There, the Court highlighted the reason for the
rule, to wit:
The universal rule that where the State gives its consent to be
sued by private parties either by general or special law, it may limit
claimants action "only up to the completion of proceedings anterior
to the stage of execution" and that the power of the Courts ends
when the judgment is rendered, since government funds and
properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must
be covered by the corresponding appropriations as required by
law. The functions and public services rendered by the State
cannot be allowed to be paralyzed or disrupted by the diversion of
public funds from their legitimate and specific objects. x x x39
With this in mind, the Court holds that the writ of preliminary
attachment must be dissolved and, indeed, it must not have been
issued in the very first place. While there is merit in private
respondents position that she, by affidavit, was able to
substantiate the allegation of fraud in the same way that the fraud
attributable to petitioners was sufficiently alleged in the complaint
and, hence, the issuance of the writ would have been justified.
Still, the writ of attachment in this case would only prove to be
useless and unnecessary under the premises, since the property
of the municipality may not, in the event that respondents claim is
validated, be subjected to writs of execution and garnishment
unless, of course, there has been a corresponding appropriation
provided by law.401avvphi1
Anent the other issues raised by petitioners relative to the denial of
their motion to dissolve the writ of attachment, i.e., unenforceability
of the contract and the veracity of private respondents allegation
of fraud, suffice it to say that these pertain to the merits of the main
action. Hence, these issues are not to be taken up in resolving the
motion to discharge, lest we run the risk of deciding or prejudging
the main case and force a trial on the merits at this stage of the
proceedings.41
There is one final concern raised by petitioners relative to the
denial of their motion for reconsideration. They complain that it
was an error for the Court of Appeals to have denied the motion on
the ground that the same was filed by an unauthorized counsel
and, hence, must be treated as a mere scrap of paper.42
It can be derived from the records that petitioner Ople, in his
personal capacity, filed his Rule 65 petition with the Court of
Appeals through the representation of the law firm Chan Robles &
Associates. Later on, municipal legal officer Joselito Reyes,
counsel for petitioner Ople, in his official capacity and for petitioner
municipality, filed with the Court of Appeals a Manifestation with
Entry of Appearance43 to the effect that he, as counsel, was
"adopting all the pleadings filed for and in behalf of [Oples
personal representation] relative to this case."44
It appears, however, that after the issuance of the Court of
Appeals decision, only Oples personal representation signed the
motion for reconsideration. There is no showing that the municipal
legal officer made the same manifestation, as he previously did
upon the filing of the petition.45 From this, the Court of Appeals
concluded that it was as if petitioner municipality and petitioner
Ople, in his official capacity, had never moved for reconsideration
of the assailed decision, and adverts to the ruling in Ramos v.
Court of Appeals46 and Municipality of Pililla, Rizal v. Court of
Appeals47 that only under well-defined exceptions may a private
counsel be engaged in lawsuits involving a municipality, none of
which exceptions obtains in this case.48
The Court of Appeals is mistaken. As can be seen from the
manner in which the Manifestation with Entry of Appearance is
worded, it is clear that petitioner municipalitys legal officer was
intent on adopting, for both the municipality and Mayor Ople, not
only the certiorari petition filed with the Court of Appeals, but also
all other pleadings that may be filed thereafter by Oples personal
representation, including the motion for reconsideration subject of
this case. In any event, however, the said motion for
reconsideration would warrant a denial, because there seems to
be no matter raised therein that has not yet been previously
addressed in the assailed decision of the Court of Appeals as well
as in the proceedings below, and that would have otherwise
warranted a different treatment of the issues involved.
WHEREFORE, the Petition is GRANTED IN PART. The January
31, 2005 Decision of the Court of Appeals in CA-G.R. SP No.
81888 is AFFIRMED insofar as it affirmed the October 20, 2003
Decision of the Regional Trial Court of Cebu City, Branch 7
denying petitioners motion to dismiss in Civil Case No. CEB-
28587. The assailed decision is REVERSED insofar as it affirmed
the said trial courts denial of petitioners motion to discharge the
writ of preliminary attachment issued in that case. Accordingly, the
August 4, 2003 Writ of Preliminary Attachment issued in Civil Case
No. CEB-28587 is ordered lifted.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167213 October 31, 2006
DARREL CORDERO, EGMEDIO BAUTISTA, ROSEMAY
BAUTISTA, MARION BAUTISTA, DANNY BOY CORDERO,
LADYLYN CORDERO and BELEN CORDERO, petitioners,
vs.
F.S. MANAGEMENT & DEVELOPMENT
CORPORATION, respondent.
DECISION
CARPIO MORALES, J.:
Assailed via petition for review are issuances of the Court of
Appeals in CA-G.R. CV No. 66198, Decision1 dated April 29, 2004
which set aside the decision of Branch 260 of the Regional Trial
Court (RTC) of Paraaque in Civil Case No. 97-067, and
Resolution dated February 21, 2005 denying petitioners motion for
reconsideration.
On or about October 27, 1994,2 petitioner Belen Cordero (Belen),
in her own behalf and as attorney-in-fact of her co-petitioners
Darrel Cordero, Egmedio Bautista, Rosemay Bautista, Marion
Bautista, Danny Boy Cordero and Ladylyn Cordero, entered into a
contract to sell3 with respondent, F.S. Management and
Development Corporation, through its chairman Roberto P.
Tolentino over five (5) parcels of land located in Nasugbu,
Batangas described in and covered by TCT Nos. 62692, 62693,
62694, 62695 and 20987. The contract to sell contained the
following terms and conditions:
1. That the BUYER will buy the whole lots above
described from the OWNER consisting of 50 hectares
more or less at P25/sq.m. or with a total price of
P12,500,000.00;
2. That the BUYER will pay the OWNER the sum of
P500,000.00 as earnest money which will entitle the
latter to enter the property and relocate the same,
construct the necessary paths and roads with the help of
the necessary parties in the area;
3. The BUYER will pay the OWNER the sum of THREE
MILLION FIVE HUNDRED THOUSAND PESOS ONLY
(P3,500,000.00) on or before April 30, 1995 and the
remaining balance will be paid within 18 mons. (sic) from
the date of payment of P3.5 Million pesos in 6 equal
quarterly payments or P1,411,000.00 every quarter;
4. The title will be transferred by the OWNER to the
BUYER upon complete payment of the agreed purchase
price. Provided that any obligation by the OWNER
brought about by encumbrance or mortgage with any
bank shall be settled by the OWNER or by the BUYER
which shall be deducted the total purchase price;
5. Provided, the OWNER shall transfer the titles to the
BUYER even before the complete payment if the BUYER
can provide post dated checks which shall be in
accordance with the time frame of payments as above
stated and which shall be guaranteed by a reputable
bank;
6. Upon the payment of the earnest money and the down
payment of 3.5 Million pesos the BUYER can occupy and
introduce improvements in the properties as owner while
owner is guaranteeing that the properties will have no
tenants or squatters in the properties and cooperate in
the development of any project or exercise of ownerships
by the BUYER;
7. Delay in the payment by the BUYER in the agreed due
date will entitle the SELLER for the legal interest.4
Pursuant to the terms and conditions of the contract to sell,
respondent paid earnest money in the amount ofP500,000 on
October 27, 1994.5 She likewise paid P1,000,000 on June 30,
1995 and another P1,000,000 on July 6, 1995. No further
payments were made thereafter.6
Petitioners thus sent respondent a demand letter dated November
28, 19967 informing her that they were revoking/canceling the
contract to sell and were treating the payments already made as
payment for damages suffered as a result of the breach of
contract, and demanding the payment of the amount of P10 Million
Pesos for actual damages suffered due to loss of income by
reason thereof. Respondent ignored the demand, however.
Hence, on February 21, 1997, petitioner Belen, in her own behalf
and as attorney-in-fact of her co-petitioners, filed before the RTC
of Paraaque a complaint for rescission of contract with
damages8 alleging that respondent failed to comply with its
obligations under the contract to sell, specifically its obligation to
pay the downpayment ofP3.5 Million by April 30, 1995, and the
balance within 18 months thereafter; and that consequently
petitioners are entitled to rescind the contract to sell as well as
demand the payment of damages.
In its Answer,9 respondent alleged that petitioners have no cause
of action considering that they were the first to violate the contract
to sell by preventing access to the properties despite payment of
P2.5 Million Pesos; petitioners prevented it from complying with its
obligation to pay in full by refusing to execute the final contract of
sale unless additional payment of legal interest is made; and
petitioners refusal to execute the final contract of sale was due to
the willingness of another buyer to pay a higher price.
In its Pre-trial Order10 of June 9, 1997, the trial court set the pre-
trial conference on July 8, 1997 during which neither respondents
representative nor its counsel failed to appear. And respondent did
not submit a pre-trial brief, hence, it was declared as in default by
the trial court which allowed the presentation of evidence ex
parte by petitioners.11
Petitioners presented as witnesses petitioner Belen and one Ma.
Cristina Cleofe. Belen testified on the execution of the contract to
sell; the failure of respondent to make the necessary payments in
compliance with the contract; the actual and moral damages
sustained by petitioners as a result of the breach, including the lost
opportunity to sell the properties for a higher price to another
buyer, Ma. Cristina Cleofe; and the attorneys fees incurred by
petitioners as a result of the suit.12 Ma. Cristina Cleofe, on the
other hand, testified on the offer she made to petitioners to buy the
properties at P35.00/sq.m.13 which was, however, turned down in
light of the contract to sell executed by petitioners in favor of the
respondent.14
Respondent filed a motion to set aside the order of default15 which
was denied by the trial court by Order dated September 12,
1997.16 Via petition for certiorari, respondent challenged the said
order, but it was denied by the Court of Appeals.17
Meanwhile, the trial court issued its decision18 on November 18,
1997, finding for petitioners and ordering respondent to pay
damages and attorneys fees. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, the contract to sell
between the Plaintiffs and the Defendant is
herebydeclared as rescinded and the defendant is
likewise ordered to pay the plaintiff:
 (1) P4,500,000.00 computed as follows: P5,000,000.00
in actual damages and P2,000,000.00 in moral and
exemplary damages, less defendants previous payment
of P2,500,000.00 under the contract to sell; and
(2) P800,000.00 by way of attorneys fees as well as the
costs of suit.
SO ORDERED. (Underscoring supplied)
Before the Court of Appeals to which respondent appealed the trial
courts decision, it raised the following errors:
3.01. The Regional Trial Court erred when it awarded
plaintiffs-appellees Five Million Pesos (P5,000,000.00) as
actual damages. Corollary thereto, the Regional Trial
Court erred in declaring defendant-appellant to have
acted in wanton disregard of its obligations under the
Contract to Sell.
3.02. The Regional Trial Court erred when it awarded
plaintiffs-appellees Two Million Pesos (P2,000,000.00) as
moral and exemplary damages.
3.03. The Regional Trial Court erred when it awarded
plaintiffs-appellees Eight Hundred Thousand Pesos
(P800,000.00) as attorneys fees.19
In the assailed decision,20 the Court of Appeals set aside the
contract to sell, it finding that petitioners obligation thereunder did
not arise for failure of respondent to pay the full purchase price. It
also set aside the award to petitioners of damages for not being
duly proven. And it ordered petitioners to return "the amount
received from [respondent]." Thus the dispositive portion of the
appellate courts decision reads:
WHEREFORE, the Decision dated 18 November 1997 of
the Regional Trial Court, Branch 260 of Paraaque City
in Civil Case No. 97-067 is hereby VACATED. A NEW
DECISION is ENTERED ordering the SETTING-ASIDE
of the Contract to Sell WITHOUT payment of damages.
Plaintiffs-appellees are further ORDERED TO RETURN
THE AMOUNTS RECEIVED from defendant-appellant.
(Underscoring supplied)
SO ORDERED.
Their motion for reconsideration having been denied, petitioners
filed the present petition for review which raises the following
issues:
1. Whether the Court of Appeals erred in ruling on the
nature of the contract despite the fact that it was not
raised on appeal.
2. Whether or not a contract to sell may be subject to
rescission under Article 1191 of the Civil Code.
3. Whether or not the Court of Appeals erred in setting
aside the award of damages.
Petitioners contend that the Court of Appeals erred in ruling on the
nature of the contract to sell and the propriety of the remedy of
rescission under Article 1191 of the Civil Code, these matters not
having been raised by respondents in the assigned errors. In any
event, petitioners claim that the contract to sell involves reciprocal
obligations, hence, it falls within the ambit of Article 1191.21
While a party is required to indicate in his brief an assignment of
errors and only those assigned shall be considered by the
appellate court in deciding the case, appellate courts have ample
authority to rule on matters not assigned as errors in an appeal if
these are indispensable or necessary to the just resolution of the
pleaded issues.22 Thus this Court has allowed the consideration of
other grounds or matters not raised or assigned as errors, to wit: 1)
grounds affecting jurisdiction over the subject matter; 2) matters
which are evidently plain or clerical errors within the contemplation
of the law; 3) matters the consideration of which is necessary in
arriving at a just decision and complete resolution of the case or to
serve the interest of justice or to avoid dispensing piecemeal
justice; 4) matters of record which were raised in the trial court and
which have some bearing on the issue submitted which the parties
failed to raise or which the lower court ignored; 5) matters closely
related to an error assigned; and 6) matters upon which the
determination of a question properly assigned is dependent.23
In the present case, the nature as well as the characteristics of a
contract to sell is determinative of the propriety of the remedy of
rescission and the award of damages. As will be discussed shortly,
the trial court committed manifest error in applying Article 1191 of
the Civil Code to the present case, a fundamental error which "lies
at the base and foundation of the proceeding, affecting the
judgment necessarily," or, as otherwise expressed, "such manifest
error as when removed destroys the foundation of the
judgment."24 Hence, the Court of Appeals correctly ruled on these
matters even if they were not raised in the appeal briefs.
Under a contract to sell, the seller retains title to the thing to be
sold until the purchaser fully pays the agreed purchase price. The
full payment is a positive suspensive condition, the non-fulfillment
of which is not a breach of contract but merely an event that
prevents the seller from conveying title to the purchaser. The non-
payment of the purchase price renders the contract to sell
ineffective and without force and effect.25
Since the obligation of petitioners did not arise because of the
failure of respondent to fully pay the purchase price, Article 1191 of
the Civil Code would have no application.
Rayos v. Court of Appeals26 explained:
Construing the contracts together, it is evident that the
parties executed a contract to sell and not a contract of
sale. The petitioners retained ownership without further
remedies by the respondents until the payment of the
purchase price of the property in full. Such payment is a
positive suspensive condition, failure of which is not
really a breach, serious or otherwise, but an event
that prevents the obligations of the petitioners to
convey title from arising, in accordance with Article
1184 of the Civil Code. x x x
The non-fulfillment by the respondent of his
obligation to pay, which is a suspensive condition to
the obligation of the petitioners to sell and deliver
the title to the property, rendered the contract to sell
ineffective and without force and effect. The parties
stand as if the conditional obligation had never
existed. Article 1191 of the New Civil Code will not
apply because it presupposes an obligation already
extant. There can be no rescission of an obligation
that is still non-existing, the suspensive condition
not having happened. [Emphasis and underscoring
supplied; citations omitted]
The subject contract to sell clearly states that "title will be
transferred by the owner (petitioners) to the buyer (respondent)
upon complete payment of the agreed purchase price."27 Since
respondent failed to fully pay the purchase price, petitioners
obligation to convey title to the properties did not arise. While
rescission does not apply in this case, petitioners may
nevertheless cancel the contract to sell, their obligation not having
arisen.28This brings this Court to Republic Act No. 6552 (THE
REALTY INSTALLMENT BUYER PROTECTION ACT). InRamos v.
Heruela29 this Court held:
Articles 1191 and 1592 of the Civil Code are applicable to
contracts of sale. In contracts to sell, RA 6552 applies.
In Rillo v. Court of Appeals,30 the Court declared:
x x x Known as the Maceda Law, R.A. No. 6552
recognizes in conditional sales of all kinds of real
estate (industrial, commercial, residential) the right
of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is
simply an event that prevents the obligation of the
vendor to convey title from acquiring binding force. It
also provides the right of the buyer on installments in
case he defaults in the payment of succeeding
installments x x x. [Emphasis supplied]
The properties subject of the contract having been intended for
commercial, and not for residential, purposes,31petitioners are
entitled to retain the payments already made by respondent. RA
6552 expressly recognizes the vendors right to cancel contracts to
sell on installment basis industrial and commercial properties with
full retention of previous payments.32 But even assuming that the
properties were not intended for commercial or industrial purpose,
since respondent paid less than two years of installments, it is not
entitled to any refund.33 It is on this score that a modification of the
challenged issuances of the appellate court is in order.
Respecting petitioners claim for damages, failure to make full
payment of the purchase price in a contract to sell is not really a
breach, serious or otherwise, but, as priorly stated, an event that
prevents the obligation of the vendor to convey title to the property
from arising.34 Consequently, the award of damages is not
warranted in this case.
With regard to attorneys fees, Article 2208 35 of the Civil Code
provides that subject to certain exceptions, attorneys fees and
expenses of litigation, other than judicial costs, cannot be
recovered in the absence of stipulation. None of the enumerated
exceptions in Article 2208 is present in this case. It bears stressing
that the policy of the law is to put no premium on the right to
litigate.36
WHEREFORE, the assailed Court of Appeals Decision dated April
29, 2004 and the Resolution dated February 21, 2005 in CA-G.R.
CV No. 66198 are AFFIRMED with the MODIFICATION that
petitioners are entitled to retain the payments already received
from respondent.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 151035 June 3, 2004
ANDREA MAYOR and VERGEL ROMULO, petitioners,
vs.
LOURDES MASANGKAY BELEN and LEONARDO
BELEN, respondents.
DECISION
YNARES-SANTIAGO, J.:
The crux of the controversy in this petition for review is whether or
not the execution of the Kasulatan ng Bilihang
Tuluyan and Kasulatan ng Sanglaan covering a 179 square meter
lot on which stands the house where respondents live is tainted
with irregularity. Petitioners claim that said contracts are binding on
respondents because the latter freely and voluntarily executed
them. The respondents, however, contend that the execution of the
documents was procured through fraud and undue influence. The
trial court sustained respondents. The ruling of the lower court was
affirmed on appeal with modifications by the appellate tribunal.
Aggrieved, petitioners elevated their cause by way of this
proceeding to this Court.
The undisputed facts as culled from the factual findings of the
appellate court1 are as follows:
Petitioner Andrea Mayor was the original owner of the a
parcel of land located at Bonifacio Street, San Pablo City
measuring about 179 square meters, more or less. On
November 27, 1979, respondent Lourdes M. Belen
purchased the subject property from Andrea Mayor in
consideration of P18,000.00 payable in installments.
Lourdes M. Belen was able to pay P11,445.00 out of the
P18,000.00 purchase price leaving a balance of
P6,555.00.
On June 17, 1980, Lourdes M. Belen sold back the subject
property to Andrea Mayor in consideration of P18,000.00. For this
purpose, Lourdes M. Belen executed the Kasulatan ng Bilihang
Tuluyan in favor of Andrea Mayor.
On June 19, 1980, to secure a loan in the amount of P12,000.00
obtained from Lourdes M. Belen, Andrea Mayor executed a real
estate mortgage over the subject property denominated
as Kasulatan ng Sanglaan in favor of the former.
On August 4, 1980, Lourdes M. Belen filed a civil suit against
Andrea Mayor, docketed as Civil Case No. SP-1755, for annulment
of the Kasulatang Bilihang Tuluyan and Kasulatan ng Sanglaan.
In the complaint, Lourdes alleged, among others, that petitioner
Andrea Mayor, through co-petitioner Vergel Romulo a.k.a. Virgilio
Romulo, made her believe that the sale in her favor by Andrea is
void because the deed of conveyance did not reflect the true
agreement of the parties as to the mode of payment of the
purchase price, i.e., the purchase price was made on installments
and not in cash as stipulated in the document. Lourdes further
averred that she was also made to believe that she might lose
what she had already paid which amounted to 70% of the
purchase price. She was convinced by the representations of
Andrea and Romulo that it would be best for the latter to make it
appear that Andrea was merely mortgaging the subject property to
her. Lourdes readily agreed to the scheme believing that it was for
the protection of her rights. It turned out that the scheme was in
fact a ruse employed by Romulo and Andrea to re-acquire the
property, thus, Lourdess consent in the execution of the Kasulatan
ng Bilihang Tuluyan and Kasulatan ng Sanglaan was obtained
through fraud and undue influence.
In her answer with counterclaim, Andrea Mayor denied the material
allegations of the complaint insisting, in sum, that Lourdes M.
Belen freely and voluntarily executed the subject contracts and the
same is binding on the parties thereto.
On August 11, 1980, Leonardo Belen filed a complaint for
Annulment of Deed of Absolute Sale and Real Estate Mortgage
against Andrea Mayor and Lourdes Masangkay a.k.a Lourdes M.
Belen. In the complaint, docketed as Civil Case No. SP-1756, he
averred that he is living with Lourdes M. Belen without benefit of
marriage. Lourdes bought the subject property from Andrea Mayor
using their common fund. On account of the fraudulent acts of
Andrea Mayor in connivance with Virgilio Romulo, Lourdes M.
Belen agreed to execute the Kasulatan ng Bilihang Tuluyan and
the Kasulatan ng Sanglaan. For lack of his approval or consent
thereto, as co-owner of the property, the said documents are null
and void.
Denying the allegations of the complaint, Andrea Mayor in her
answer with counterclaim averred that Leonardo Belen did not
have a cause of action because he was neither a party nor a privy
to any of the subject contracts. Andrea also alleged that the
execution thereof was Lourdess free and voluntary act.
Subsequently on February 16, 1981, Leonardo Belen and Lourdes
M. Belen filed a complaint for Damages against Virgilio Romulo. In
the complaint, docketed as Civil Case No. SP-1821, Lourdes and
Leonardo averred that they sustained damages for Virgilios
fraudulent acts of inducing Lourdes to sign the subject contracts.
In his answer, Virgilio Romulo insisted that he never had any
transaction with Lourdes M. Belen and Leonardo Belen. For
instituting a baseless action against him, Lourdes and Leonardo
should be held liable for damages.
The three cases were consolidated and jointly tried. After trial, the
court a quo rendered judgment in favor of the Belens, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring
the Kasulatan ng Bilihang Tuluyan dated June 17, 1980
and the Kasulatan ng Sanglaan dated June 19, 1980 null
and void and ordering:
 1. the defendants to jointly and severally pay to
the plaintiffs Leonardo Belen and Lourdes
Masangkay Belen the sum of P15,000.00 for
their attorneys fees and costs of litigation in
these three cases.
2. Virgilio Romulo to pay the plaintiffs the sum
of P20,000.00 as moral damages.
Dissatisfied, petitioners elevated their cause to the Court of
Appeals which rendered judgment2 affirming the assailed decision
but deleting the award of attorneys fees. A motion for
reconsideration was subsequently denied.3
Hence, the instant petition filed by petitioners who argue:
THAT WITH DUE RESPECT TO THE FINDINGS MADE
BY PUBLIC RESPONDENT HONORABLE COURT OF
APPEALS, THE PRIVATE RESPONDENTS WERE NOT
ABLE TO PROVE THE FRAUD AND UNDUE
INFLUENCE THEY CLAIMED TO HAVE BEEN
EXERTED ON THEM BY THE PETITIONER IN THE
EXECUTION OF THE QUESTIONED KASULATAN NG
BILIHAN AND KASULATAN NG SANGLAAN.
The issue for resolution is whether or not fraud attended the
execution of the Kasulatan ng Bilihan and Kasulatan ng Sanglaan.
The Civil Code provides that
ART. 1338. There is fraud when, through insidious words
or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without
them, he would not have agreed to.
As defined, fraud refers to all kinds of deception, whether through
insidious machination, manipulation, concealment or
misrepresentation to lead another party into error.4 The deceit
employed must be serious. It must be sufficient to impress or lead
an ordinarily prudent person into error, taking into account the
circumstances of each case.5
In support of their cause, petitioners intone the shopworn legal
maxim that fraus est odiosa et non praesumenda and argue that
to establish the claim of fraud, evidence must be clear and more
than merely preponderant. They contend, in sum, that the two
deeds were duly executed by the parties thereto in accordance
with the formalities required by law and as public documents the
evidence to overcome their recitals is wanting.
We disagree.
Impressive as the arguments petitioners have advanced in support
of their cause may be, the fatal flaw lies in their inability to
convincingly substantiate their claim that Lourdes M. Belen signed
the contracts freely and voluntarily.
This brings to the fore Lourdes M. Belens limited educational
attainment. While indeed petitioners point out that the deeds
denominated as Kasulatan ng Bilihang Tuluyan and Kasulatan ng
Sanglaan were executed in Tagalog, a close scrutiny thereof
shows that they are practically literal translations of their English
counterparts. Thus, the mere fact that the documents were
executed in the vernacular neither clarified nor simplified matters
for Lourdes who admitted on cross-examination that she merely
finished Grade 3, could write a little, and understand a little of
the Tagalog language.6
The appellate court could not then be faulted when it invoked
Article 1332 of the Civil Code which states:
ART. 1332. When one of the parties is unable to read, or
if the contract is in a language not understood by him,
and mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully
explained to the former.
As aptly pointed out by the Court of Appeals, the principle
that a party is presumed to know the import of a
document to which he affixes his signature is modified by
the foregoing article. Under the said article, where a party
is unable to read or when the contract is in a language
not understood by a party and mistake or fraud is
alleged, the obligation to show that the terms of the
contract had been fully explained to said party who is
unable to read or understand the language of the
contract devolves on the party seeking to enforce it. The
burden rests upon the party who seeks to enforce the
contract to show that the other party fully understood the
contents of the document. If he fails to discharge this
burden, the presumption of mistake, if not, fraud, stands
unrebutted and controlling.7
In this case, petitioners alleged that Lourdes M. Belen affixed her
signature on the questioned contracts freely and voluntarily. We
have assiduously scoured the record but like the appellate court
we have not come across convincing evidence to support their
allegations. In civil cases, he who alleges a fact has the burden of
proving it by a preponderance of evidence.8 Suffice it to state that
such self-serving claims are not enough to rebut the presumption
of fraud provided for in Article 1332 of the Civil Code. As the party
claiming affirmative relief from the court, it is incumbent upon
petitioners to convincingly prove their claim. This they failed to do.
Bare allegations, unsubstantiated by evidence are not equivalent
to proof under our Rules.9 In short, mere allegations are not
evidence.10
Concededly, both the Kasulatan ng Bilihang Tuluyan and the
Kasulatan ng Sanglaan are public documents and there is no
dispute that generally, a notarized document carries the
evidentiary weight conferred upon it with respect to its due
execution. In addition, documents acknowledged before a notary
public have in their favor the presumption of regularity. However,
the presumption is not absolute and may be rebutted by clear and
convincing evidence to the contrary.11 The presumption cannot be
made to apply in this case because the regularity in the execution
of the documents were challenged in the proceedings below where
their prima facie validity was overthrown by the highly questionable
circumstances pointed out by both trial and appellate courts.
Furthermore, notarization per se is not a guarantee of the validity
of the contents of a document. Indeed, as stated by the Supreme
Court in Nazareno v. CA:12
The fact that the deed of sale was notarized is not a
guarantee of the validity of its contents. As held inSuntay
v. Court of Appeals:13
Though the notarization of the deed of sale in
question vests in its favor the presumption of
regularity, it is not the intention nor the function
of the notary public to validate and make
binding an instrument never, in the first place,
intended to have any binding legal effect upon
the parties thereto. The intention of the parties
still and always is the primary consideration in
determining the true nature of the contract.
The impugned documents cannot be presumed as valid because
of the direct challenge posed thereto by respondents, which is
precisely the reason for the commencement of this case: to bring
to the fore the irregularity in their execution.
There are, moreover, other factual circumstances pointed out by
both the trial and appellate courts which militate against the
contention of petitioners. The evidence on record shows that the
respondents Belens intended to stay and occupy the subject land
for a considerable length of time. As borne out by the records,
respondents bought from Celita Bordeos the house standing on
the subject land then owned by Andrea Mayor.14 Four years later or
on November 27, 1979, respondents bought the subject land from
petitioner Andrea Mayor.15
They bought the said land through installments and already paid
P11,445.00 of the P18,000.00 purchase price. They also caused
the transfer in their names of the tax declarations over the subject
land and house. This they did even before they could have
completed the payment of the purchase price. In short, their
intention and desire to stay on the property is very evident.
Petitioners suggestion, therefore, that respondents made a
sudden volte face and decided to resell the property to them
seven months from the date of the propertys acquisition, after
payment of almost two-thirds of the purchase price and
transferring the tax declarations thereof in respondents names,
borders on the absurd and the incredible. It simply is contrary to
human experience for respondents to have had a hasty change of
heart to dispose of the land on which they intend to make their
home and upon which they had invested so much.
Petitioners advance the excuse that respondents wanted to
immediately dispose of the subject property because the area
would be soon converted into a park. If this were so, why would
Lourdes Belen thereafter accept the very same property as
security knowing fully well that it would revert to the public
domain?
A mortgage subjects the property upon which it is imposed,
whoever the possessor may be, to the fulfillment of the obligation
whose security it was constituted.16 Thus, in case of non-payment,
the creditor may proceed against the property for the fulfillment of
the obligation. No creditor would accept property as security for the
fulfillment of the obligation knowing that the property offered as
security would soon be out of the commerce of man.17
Finally, the non-presentation of petitioner Andrea Mayor on the
witness stand is likewise not lost on us and adds to the weakness
of petitioners cause. While it is true that the non-presentation of a
witness is not a reason for discrediting a partys defense, still we
are inclined to take this omission against them in view of the
numerous loopholes in their defense.18
All told, we see no reason in overturning the findings of the
appellate court. As has often been stated, "[t]he jurisdiction of this
Court over cases brought to it from the Court of Appeals is limited
to a review of questions of law since the factual conclusions
thereon are conclusive. There are of course exceptions to this rule,
but none obtain in the case at bar to warrant a scrutiny of the Court
of Appeals conclusions which are supported by the evidence on
record and carry more weight, it having affirmed the trial courts
factual conclusions."19
WHEREFORE, in view of all the foregoing, the petition
is DENIED and the decision dated April 3, 2001 of the Court of
Appeals in CA-G.R. CV No. 48646, is AFFIRMED in toto.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 201167 February 27, 2013
GOTESCO PROPERTIES, INC., JOSE C. GO, EVELYN GO,
LOURDES G. ORTIGA, GEORGE GO, and VICENTE
GO, Petitioners,
vs.
SPOUSES EUGENIO and ANGELINA FAJARDO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 of
the Rules of Court is the July 22, 2011 Decision1and February 29,
2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
112981, which affirmed with modification the August 27, 2009
Decision3 of the Office of the President (OP).
The Facts
On January 24, 1995, respondent-spouses Eugenio and Angelina
Fajardo (Sps. Fajardo) entered into a Contract to Sell4 (contract)
with petitioner-corporation Gotesco Properties, Inc. (GPI) for the
purchase of a 100-square meter lot identified as Lot No. 13, Block
No.6, Phase No. IV of Evergreen Executive Village, a subdivision
project owned and developed by GPI located at Deparo Road,
Novaliches, Caloocan City. The subject lot is a portion of a bigger
lot covered by Transfer Certificate of Title (TCT) No.
2442205 (mother title).
Under the contract, Sps. Fajardo undertook to pay the purchase
price of P126,000.00 within a 10-year period, including interest at
the rate of nine percent (9%) per annum. GPI, on the other hand,
agreed to execute a final deed of sale (deed) in favor of Sps.
Fajardo upon full payment of the stipulated consideration.
However, despite its full payment of the purchase price on January
17, 20006 and subsequent demands,7 GPI failed to execute the
deed and to deliver the title and physical possession of the subject
lot. Thus, on May 3, 2006, Sps. Fajardo filed before the Housing
and Land Use Regulatory Board-Expanded National Capital
Region Field Office (HLURBENCRFO) a complaint8 for specific
performance or rescission of contract with damages against GPI
and the members of its Board of Directors namely, Jose C. Go,
Evelyn Go, Lourdes G. Ortiga, George Go, and Vicente Go
(individual petitioners), docketed as HLURB Case No. REM-
050306-13319.
Sps. Fajardo averred that GPI violated Section 20 9 of Presidential
Decree No. 95710 (PD 957) due to its failure to construct and
provide water facilities, improvements, infrastructures and other
forms of development including water supply and lighting facilities
for the subdivision project. They also alleged that GPI failed to
provide boundary marks for each lot and that the mother title
including the subject lot had no technical description and was even
levied upon by the Bangko Sentral ng Pilipinas (BSP) without their
knowledge. They thus prayed that GPI be ordered to execute the
deed, to deliver the corresponding certificate of title and the
physical possession of the subject lot within a reasonable period,
and to develop Evergreen Executive Village; or in the alternative,
to cancel and/or rescind the contract and refund the total payments
made plus legal interest starting January 2000.
For their part, petitioners maintained that at the time of the
execution of the contract, Sps. Fajardo were actually aware that
GPI's certificate of title had no technical description inscribed on it.
Nonetheless, the title to the subject lot was free from any liens or
encumbrances.11 Petitioners claimed that the failure to deliver the
title to Sps. Fajardo was beyond their control 12 because while
GPI's petition for inscription of technical description (LRC Case No.
4211) was favorably granted13 by the Regional Trial Court of
Caloocan City, Branch 131 (RTC-Caloocan), the same was
reversed14 by the CA; this caused the delay in the subdivision of
the property into individual lots with individual titles. Given the
foregoing incidents, petitioners thus argued that Article 1191 of the
Civil Code (Code) the provision on which Sps. Fajardo anchor
their right of rescission remained inapplicable since they were
actually willing to comply with their obligation but were only
prevented from doing so due to circumstances beyond their
control. Separately, petitioners pointed out that BSP's adverse
claim/levy which was annotated long after the execution of the
contract had already been settled.
The Ruling of the HLURB-ENCRFO
On February 9, 2007, the HLURB-ENCRFO issued a Decision15 in
favor of Sps. Fajardo, holding that GPIs obligation to execute the
corresponding deed and to deliver the transfer certificate of title
and possession of the subject lot arose and thus became due and
demandable at the time Sps. Fajardo had fully paid the purchase
price for the subject lot. Consequently, GPIs failure to meet the
said obligation constituted a substantial breach of the contract
which perforce warranted its rescission. In this regard, Sps.
Fajardo were given the option to recover the money they paid to
GPI in the amount of P168,728.83, plus legal interest reckoned
from date of extra-judicial demand in September 2002 until fully
paid. Petitioners were likewise held jointly and solidarily liable for
the payment of moral and exemplary damages, attorney's fees and
the costs of suit.
The Ruling of the HLURB Board of Commissioners
On appeal, the HLURB Board of Commissioners affirmed the
above ruling in its August 3, 2007 Decision,16finding that the failure
to execute the deed and to deliver the title to Sps. Fajardo
amounted to a violation of Section 25 of PD 957 which therefore,
warranted the refund of payments in favor of Sps. Fajardo.
The Ruling of the OP
On further appeal, the OP affirmed the HLURB rulings in its August
27, 2009 Decision.17 In so doing, it emphasized the mandatory
tenor of Section 25 of PD 957 which requires the delivery of title to
the buyer upon full payment and found that GPI unjustifiably failed
to comply with the same.
The Ruling of the CA
On petition for review, the CA affirmed the above rulings with
modification, fixing the amount to be refunded to Sps. Fajardo at
the prevailing market value of the property18 pursuant to the ruling
in Solid Homes v. Tan (Solid Homes).19
The Petition
Petitioners insist that Sps. Fajardo have no right to rescind the
contract considering that GPI's inability to comply therewith was
due to reasons beyond its control and thus, should not be held
liable to refund the payments they had received. Further, since the
individual petitioners never participated in the acts complained of
nor found to have acted in bad faith, they should not be held liable
to pay damages and attorney's fees.
The Court's Ruling
The petition is partly meritorious.
A. Sps. Fajardos right to rescind
It is settled that in a contract to sell, the seller's obligation to deliver
the corresponding certificates of title is simultaneous and
reciprocal to the buyer's full payment of the purchase price.20 In
this relation, Section 25 of PD 957, which regulates the subject
transaction, imposes on the subdivision owner or developer the
obligation to cause the transfer of the corresponding certificate of
title to the buyer upon full payment, to wit:
Sec. 25. Issuance of Title. The owner or developer shall deliver
the title of the lot or unit to the buyer upon full payment of the
lot or unit. No fee, except those required for the registration of the
deed of sale in the Registry of Deeds, shall be collected for the
issuance of such title. In the event a mortgage over the lot or unit
is outstanding at the time of the issuance of the title to the buyer,
the owner or developer shall redeem the mortgage or the
corresponding portion thereof within six months from such
issuance in order that the title over any fully paid lot or unit may be
secured and delivered to the buyer in accordance herewith.
(Emphasis supplied.)
In the present case, Sps. Fajardo claim that GPI breached the
contract due to its failure to execute the deed of sale and to deliver
the title and possession over the subject lot, notwithstanding the
full payment of the purchase price made by Sps. Fajardo on
January 17, 200021 as well as the latters demand for GPI to
comply with the aforementioned obligations per the letter 22 dated
September 16, 2002. For its part, petitioners proffer that GPI could
not have committed any breach of contract considering that its
purported non-compliance was largely impelled by circumstances
beyond its control i.e., the legal proceedings concerning the
subdivision of the property into individual lots. Hence, absent any
substantial breach, Sps. Fajardo had no right to rescind the
contract.
The Court does not find merit in petitioners contention.
A perusal of the records shows that GPI acquired the subject
property on March 10, 1992 through a Deed of Partition and
Exchange23 executed between it and Andres Pacheco (Andres),
the former registered owner of the property. GPI was issued TCT
No. 244220 on March 16, 1992 but the same did not bear any
technical description.24 However, no plausible explanation was
advanced by the petitioners as to why the petition for inscription
(docketed as LRC Case No. 4211) dated January 6, 2000, 25 was
filed only after almost eight (8) years from the acquisition of the
subject property.
Neither did petitioners sufficiently explain why GPI took no positive
action to cause the immediate filing of a new petition for
inscription within a reasonable time from notice of the July 15,
2003 CA Decision which dismissed GPIs earlier petition based on
technical defects, this notwithstanding Sps. Fajardo's full payment
of the purchase price and prior demand for delivery of title. GPI
filed the petition before the RTC-Caloocan, Branch 122 (docketed
as LRC Case No. C-5026) only on November 23, 2006,26 following
receipt of the letter27 dated February 10, 2006 and the filing of the
complaint on May 3, 2006, alternatively seeking refund of
payments. While the court a quo decided the latter petition for
inscription in its favor,28 there is no showing that the same had
attained finality or that the approved technical description had in
fact been annotated on TCT No. 244220, or even that the
subdivision plan had already been approved.
Moreover, despite petitioners allegation29 that the claim of BSP
had been settled, there appears to be no cancellation of the
annotations30 in GPIs favor. Clearly, the long delay in the
performance of GPI's obligation from date of demand on
September 16, 2002 was unreasonable and unjustified. It cannot
therefore be denied that GPI substantially breached its contract to
sell with Sps. Fajardo which thereby accords the latter the right to
rescind the same pursuant to Article 1191 of the Code, viz:
ART. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with articles
1385 and 1388 and the Mortgage Law.
B. Effects of rescission
At this juncture, it is noteworthy to point out that rescission does
not merely terminate the contract and release the parties from
further obligations to each other, but abrogates the contract from
its inception and restores the parties to their original positions as if
no contract has been made.31 Consequently, mutual restitution,
which entails the return of the benefits that each party may have
received as a result of the contract, is thus required.32To be sure, it
has been settled that the effects of rescission as provided for in
Article 1385 of the Code are equally applicable to cases under
Article 1191, to wit:
xxxx
Mutual restitution is required in cases involving rescission
under Article 1191.1wphi1 This means bringing the parties back
to their original status prior to the inception of the contract. Article
1385 of the Civil Code provides, thus:
ART. 1385. Rescission creates the obligation to return the
things which were the object of the contract, together with
their fruits, and the price with its interest; consequently, it can
be carried out only when he who demands rescission can
return whatever he may be obligated to restore.
Neither shall rescission take place when the things which are the
object of the contract are legally in the possession of third persons
who did not act in bad faith.
In this case, indemnity for damages may be demanded from the
person causing the loss.
This Court has consistently ruled that this provision applies
to rescission under Article 1191:
Since Article 1385 of the Civil Code expressly and clearly states
that "rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the
price with its interest," the Court finds no justification to sustain
petitioners position that said Article 1385 does not apply to
rescission under Article 1191. x x x33 (Emphasis supplied; citations
omitted.)
In this light, it cannot be denied that only GPI benefited from the
contract, having received full payment of the contract price plus
interests as early as January 17, 2000, while Sps. Fajardo
remained prejudiced by the persisting non-delivery of the subject
lot despite full payment. As a necessary consequence, considering
the propriety of the rescission as earlier discussed, Sps. Fajardo
must be able to recover the price of the property pegged at its
prevailing market value consistent with the Courts pronouncement
in Solid Homes,34 viz:
Indeed, there would be unjust enrichment if respondents Solid
Homes, Inc. & Purita Soliven are made to pay only the purchase
price plus interest. It is definite that the value of the subject
property already escalated after almost two decades from the time
the petitioner paid for it. Equity and justice dictate that the
injured party should be paid the market value of the lot,
otherwise, respondents Solid Homes, Inc. & Purita Soliven
would enrich themselves at the expense of herein lot owners
when they sell the same lot at the present market value.
Surely, such a situation should not be countenanced for to do so
would be contrary to reason and therefore, unconscionable. Over
time, courts have recognized with almost pedantic adherence that
what is inconvenient or contrary to reason is not allowed in law.
(Emphasis supplied.)
On this score, it is apt to mention that it is the intent of PD 957 to
protect the buyer against unscrupulous developers, operators
and/or sellers who reneged on their obligations.35 Thus, in order to
achieve this purpose, equity and justice dictate that the injured
party should be afforded full recompense and as such, be allowed
to recover the prevailing market value of the undelivered lot which
had been fully paid for.1wphi1
C. Moral and exemplary damages, attorneys fees and costs
of suit
Furthermore, the Court finds that there is proper legal basis to
accord moral and exemplary damages and attorney's fees,
including costs of suit. Verily, GPIs unjustified failure to comply
with its obligations as above-discussed caused Sps. Fajardo
serious anxiety, mental anguish and sleepless nights, thereby
justifying the award of moral damages. In the same vein, the
payment of exemplary damages remains in order so as to prevent
similarly minded subdivision developers to commit the same
transgression. And finally, considering that Sps. Fajardo were
constrained to engage the services of counsel to file this suit, the
award of attorneys fees must be likewise sustained.
D. Liability of individual Petitioners
However, the Court finds no basis to hold individual petitioners
solidarily liable with petitioner GPI for the payment of damages in
favor of Sps. Fajardo since it was not shown that they acted
maliciously or dealt with the latter in bad faith. Settled 1s the rule
that in the absence of malice and bad faith, as in this case, officers
of the corporation cannot be made personally liable for liabilities of
the corporation which, by legal fiction, has a personality separate
and distinct from its officers, stockholders, and members. 36
WHEREFORE, the assailed July 22, 2011 Decision and February
29, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.
112981 are hereby AFFIRMED WITH MODIFICATION, absolving
individual petitioners Jose C. Go, Evelyn Go, Lourdes G. Ortiga,
George Go, and Vicente Go from personal liability towards
respondent-spouses Eugenio and Angelina Fajardo.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170604 September 2, 2013
HEIRS OF MARGARITA PRODON, PETITIONERS,
vs.
HEIRS OF MAXIMO S. ALVAREZ AND VALENTINA CLAVE,
REPRESENTED BY REV. MAXIMO ALVAREZ,
JR.,RESPONDENTS.
DECISION
BERSAMIN, J.:
The Best Evidence Rule applies only when the terms of a written
document are the subject of the inquiry. In an action for quieting of
title based on the inexistence of a deed of sale with right to
repurchase that purportedly cast a cloud on the title of a property,
therefore, the Best Evidence Rule does not apply, and the
defendant is not precluded from presenting evidence other than
the original document.
The Case
This appeal seeks the review and reversal of the decision
promulgated on August 18, 2005,1 whereby the Court of Appeals
(CA) reversed the judgment rendered on November 5, 1997 by the
Regional Trial Court (RTC), Branch 35, in Manila in Civil Case No.
96-78481 entitled Heirs of Maximo S Alvarez and Valentina Clave,
represented by Rev. Maximo S. Alvarez and Valentina Clave,
represented by Rev. Maximo Alvarez, Jr. v. Margarita Prodon and
the Register of Deeds of the City of Manila dismissing the
respondents action for quieting of title.2
Antecedents
In their complaint for quieting of title and damages against
Margarita Prodon,3 the respondents averred as the plaintiffs that
their parents, the late spouses Maximo S. Alvarez, Sr. and
Valentina Clave, were the registered owners of that parcel of land
covered by Transfer Certificate of Title (TCT) No. 84797 of the
Register of Deeds of Manila; that their parents had been in
possession of the property during their lifetime; that upon their
parents deaths, they had continued the possession of the property
as heirs, paying the real property taxes due thereon; that they
could not locate the owners duplicate copy of TCT No. 84797, but
the original copy of TCT No. 84797 on file with the Register of
Deeds of Manila was intact; that the original copy contained an
entry stating that the property had been sold to defendant Prodon
subject to the right of repurchase; and that the entry had been
maliciously done by Prodon because the deed of sale with right to
repurchase covering the property did not exist. Consequently, they
prayed that the entry be cancelled, and that Prodon be adjudged
liable for damages.
The entry sought to be cancelled reads:
ENTRY NO. 3816/T-84797 SALE W/ RIGHT TO REPURCHASE
IN FAVOR OF: MARGARITA PRODON, SINGLE, FOR THE SUM
OF P120,000.00, THE HEREIN REGISTERED OWNER
RESERVING FOR HIMSELF THE RIGHTS TO REPURCHASE
SAID PROPERTY FOR THE SAME AMOUNT WITHIN THE
PERIOD OF SIX MONTH (sic) FROM EXECUTION THEREOF.
OTHER CONDITION SET FORTH IN (DOC. NO. 321, PAGE 66,
BOOK NO. VIII OF LISEO A. RAZON, NOT.PUB. OF MANILA)
DATE OF INSTRUMENT SEPT. 9, 1975
DATE OF INSCRIPTION SEPT. 10, 1975,
AT 3:42 P.M.4
In her answer,5 Prodon claimed that the late Maximo Alvarez, Sr.
had executed on September 9, 1975 the deed of sale with right to
repurchase; that the deed had been registered with the Register of
Deeds and duly annotated on the title; that the late Maximo
Alvarez, Sr. had been granted six months from September 9, 1975
within which to repurchase the property; and that she had then
become the absolute owner of the property due to its non-
repurchase within the given 6-month period.
During trial, the custodian of the records of the property attested
that the copy of the deed of sale with right to repurchase could not
be found in the files of the Register of Deeds of Manila.
On November 5, 1997, the RTC rendered judgment,6 finding
untenable the plaintiffs contention that the deed of sale with right
to repurchase did not exist. It opined that although the deed itself
could not be presented as evidence in court, its contents could
nevertheless be proved by secondary evidence in accordance with
Section 5, Rule 130 of the Rules of Court, upon proof of its
execution or existence and of the cause of its unavailability being
without bad faith. It found that the defendant had established the
execution and existence of the deed, to wit:
In the case under consideration, the execution and existence of
the disputed deed of sale with right to repurchase accomplished by
the late Maximo Alvarez in favor of defendant Margarita Prodon
has been adequately established by reliable and trustworthy
evidences (sic). Defendant Prodon swore that on September 9,
1975 she purchased the land covered by TCT No. 84747 (Exhibit
1) from its registered owners Maximo S. Alvarez, Sr. and Valentina
Clave (TSN, Aug. 1, 1997, pp.5-7); that the deed of sale with right
to repurchase was drawn and prepared by Notary Public Eliseo
Razon (Ibid., p. 9); and that on September 10, 1975, she
registered the document in the Register of Deeds of Manila (Ibid.,
pp.18-19).
The testimony of Margarita Prodon has been confirmed by the
Notarial Register of Notary Public Eliseo Razon dated September
10, 1975 (Exhibit 2), and by the Primary Entry Book of the Register
of Deeds of Manila (Exhibit 4).
Page 66 of Exhibit 2 discloses, among others, the following
entries, to wit: "No. 321; Nature of Instrument: Deed of Sale with
Right to Repurchase; Name of Persons: Maximo S. Alvarez and
Valentina Alvarez (ack.); Date and Month: 9 Sept." (Exhibit 2-a).
Exhibit 4, on the other hand, also reveals the following data, to wit:
Number of Entry: 3816; Month, Day and Year: Sept. 10, 1975;
Hour and Minute: 3:42 p.m.; Nature of Contract: Sale with Right to
Repurchase; Executed by: Maximo S. Alvarez; In favor: Margarita
Prodon; Date of Document: 9-9-75; Contract value: 120,000.
(Exhibit 4-a). Under these premises the Court entertains no doubt
about the execution and existence of the controverted deed of sale
with right to repurchase.7
The RTC rejected the plaintiffs submission that the late Maximo
Alvarez, Sr. could not have executed the deed of sale with right to
repurchase because of illness and poor eyesight from cataract. It
held that there was no proof that the illness had rendered him
bedridden and immobile; and that his poor eyesight could be
corrected by wearing lenses.
The RTC concluded that the original copy of the deed of sale with
right to repurchase had been lost, and that earnest efforts had
been exerted to produce it before the court. It believed Jose
Camilons testimony that he had handed the original to one Atty.
Anacleto Lacanilao, but that he could not anymore retrieve such
original from Atty. Lacanilao because the latter had meanwhile
suffered from a heart ailment and had been recuperating.
Ruling of the CA
On appeal, the respondents assigned the following errors, namely:
A.
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT THE
DUE EXECUTION AND EXISTENCE OF THE QUESTIONED
DEED OF SALE WITH RIGHT TO REPURCHASE HAS BEEN
DULY PROVED BY THE DEFENDANT.
B.
THE TRIAL COURT GRAVELY ERRED IN ADMITTING THE
PIECES OF EVIDENCE PRESENTED BY THE DEFENDANTS AS
PROOFS OF THE DUE EXECUTION AND EXISTENCE OF THE
QUESTIONED DEED OF SALE WITH RIGHT TO REPURCHASE.
C.
THE TRIAL COURT SERIOUSLY ERRED IN FINDING THAT THE
QUESTIONED DEED OF SALE WITH RIGHT TO REPURCHASE
HAS BEEN LOST OR OTHERWISE COULD NOT BE
PRODUCED IN COURT WITHOUT THE FAULT OF THE
DEFENDANT.
D.
THE TRIAL COURT GRAVELY ERRED IN REJECTING THE
PLAINTIFFS CLAIM THAT THEIR FATHER COULD NOT HAVE
EXECUTED THE QUESTIONED DOCUMENT AT THE TIME OF
ITS ALLEGED EXECUTION.8
On August 18, 2005, the CA promulgated its assailed decision,
reversing the RTC, and ruling as follows:
The case of the Department of Education Culture and Sports
(DECS) v. Del Rosario in GR No. 146586 (January 26, 2005) is
instructive in resolving this issue. The said case held:
"Secondary evidence of the contents of a document refers to
evidence other than the original document itself. A party may
introduce secondary evidence of the contents of a written
instrument not only when the original is lost or destroyed, but also
when it cannot be produced in court, provided there is no bad faith
on the part of the offeror. However, a party must first satisfactorily
explain the loss of the best or primary evidence before he can
resort to secondary evidence. A party must first present to the
court proof of loss or other satisfactory explanation for non-
production of the original instrument. The correct order of proof is
as follows: existence, execution, loss, contents, although the court
in its discretion may change this order if necessary."
It is clear, therefore, that before secondary evidence as to the
contents of a document may be admitted in evidence, the
existence of [the] document must first be proved, likewise, its
execution and its subsequent loss.
In the present case, the trial court found all three (3) prerequisites
ha[ve] been established by Margarita Prodon. This Court, however,
after going through the records of the case, believes otherwise.
The Court finds that the following circumstances put doubt on the
very existence of the alleged deed of sale. Evidence on record
showed that Maximo Alvarez was hospitalized between August 23,
1975 to September 3, 1975 (Exhibit "K"). It was also established
by said Exhibit "L" that Maximo Alvarez suffered from paralysis of
half of his body and blindness due to cataract. It should further be
noted that barely 6 days later, on September 15, 1975, Maximo
Alvarez was again hospitalized for the last time because he died
on October of 1975 without having left the hospital. This lends
credence to plaintiffs-appellants assertion that their father, Maximo
Alvarez, was not physically able to personally execute the deed of
sale and puts to serious doubt [on] Jose Camilions testimony that
Maximo Alvarez, with his wife, went to his residence on September
5, 1975 to sell the property and that again they met on September
9, 1975 to sign the alleged deed of sale (Exhibits "A" and "1"). The
Court also notes that from the sale in 1975 to 1996 when the case
was finally filed, defendant-appellee never tried to recover
possession of the property nor had she shown that she ever paid
Real Property Tax thereon. Additionally, the Transfer Certificate of
Title had not been transferred in the name of the alleged present
owner. These actions put to doubt the validity of the claim of
ownership because their actions are contrary to that expected of
legitimate owners of property.
Moreover, granting, in arguendo, that the deed of sale did exist,
the fact of its loss had not been duly established. In De Vera, et al.
v Sps. Aguilar (218 SCRA 602 1993), the Supreme Court held that
after proof of the execution of the Deed it must also be established
that the said document had been lost or destroyed, thus:
"After the due execution of the document has been established, it
must next be proved that said document has been lost or
destroyed. The destruction of the instrument may be proved by
any person knowing the fact. The loss may be shown by any
person who knew the fact of its loss, or by anyone who had made,
in the judgment of the court, a sufficient examination in the place
or places where the document or papers of similar character are
usually kept by the person in whose custody the document lost
was, and has been unable to find it; or who has made any other
investigation which is sufficient to satisfy the court that the
instrument is indeed lost.
However, all duplicates or counterparts must be accounted for
before using copies. For, since all the duplicates or multiplicates
are parts of the writing itself to be proved, no excuse for non-
production of the writing itself can be regarded as established until
it appears that all of its parts are unavailable (i.e. lost, retained by
the opponent or by a third person or the like).
In the case at bar, Atty. Emiliano Ibasco, Jr., notary public who
notarized the document testified that the alleged deed of sale has
about four or five original copies. Hence, all originals must be
accounted for before secondary evidence can be given of any one.
This[,] petitioners failed to do. Records show that petitioners
merely accounted for three out of four or five original copies." (218
SCRA at 607-608)
In the case at bar, Jose Camilions testimony showed that a copy
was given to Atty. Anacleto Lacanilao but he could not recover said
copy. A perusal of the testimony does not convince this Court that
Jose Camilion had exerted sufficient effort to recover said copy. x x
x
xxxx
The foregoing testimony does not convince this Court that Jose
Camilion had exerted sufficient effort to obtain the copy which he
said was with Atty. Lacanilao. It should be noted that he never
claimed that Atty. Lacanilao was already too sick to even try
looking for the copy he had. But even assuming this is to be so,
Jose Camilion did not testify that Atty. Lacanilao had no one in his
office to help him find said copy. In fine, this Court believes that the
trial court erred in admitting the secondary evidence because
Margarita Prodon failed to prove the loss or destruction of the
deed.
In fine, the Court finds that the secondary evidence should not
have been admitted because Margarita Prodon failed to prove the
existence of the original deed of sale and to establish its loss.
xxxx
WHEREFORE, in view of the foregoing, the Decision of the
Regional Trial Court of Manila, Branch 35 in Civil Case No. 96-
78481 is hereby REVERSED and a new one entered ordering the
cancellation of Entry No. 3816/T-84797 inscribed at the back of
TCT No. 84797 in order to remove the cloud over plaintiff-
appellants title.
SO ORDERED.9
The heirs of Margarita Prodon (who meanwhile died on March 3,
2002) filed an Omnibus Motion for Substitution of Defendant and
for Reconsideration of the Decision,10 wherein they alleged that the
CA erred: (a) in finding that the pre-requisites for the admission of
secondary evidence had not been complied with; (b) in concluding
that the late Maximo Alvarez, Sr. had been physically incapable of
personally executing the deed of sale with right to repurchase; and
(c) in blaming them for not recovering the property, for not paying
the realty taxes thereon, and for not transferring the title in their
names.
On November 22, 2005, the CA issued itsresolution,11 allowing the
substitution of the heirs of Margarita Prodon, and denying their
motion for reconsideration for its lack of merit.
Hence, the heirs of Margarita Prodon (petitioners) have appealed
to the Court through petition for review on certiorari.
Issues
In this appeal, the petitioners submit the following as issues,
namely: (a) whether the pre-requisites for the admission of
secondary evidence had been complied with; (b) whether the late
Maximo Alvarez, Sr. had been physically incapable of personally
executing the deed of sale with right to repurchase;and (c) whether
Prodons claim of ownership was already barred by laches.12
Ruling
The appeal has no merit.
1.
Best Evidence Rulewas not applicable herein
We focus first on an unseemly error on the part of the CA that,
albeit a harmless one, requires us to re-examine and rectify in
order to carry out our essential responsibility of educating the
Bench and the Bar on the admissibility of evidence. An analysis
leads us to conclude that the CA and the RTC both misapplied the
Best Evidence Rule to this case, and their misapplication diverted
the attention from the decisive issue in this action for quieting of
title. We shall endeavor to correct the error in order to turn the
case to the right track.
Section 3, Rule 130 of the Rules of Court embodies the Best
Evidence
Rule, to wit:
Section 3. Original document must be produced; exceptions.
When the subject of inquiry is the contents of a document, no
evidence shall be admissible other than the original document
itself, except in the following cases:
(a) When the original has been lost or destroyed, or
cannot be produced in court, without bad faith on the part
of the offeror;
(b) When the original is in the custody or under control of
the party against whom the evidence is offered, and the
latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or
other documents which cannot be examined in court
without great loss of time and the fact sought to be
established from them is only the general result of the
whole; and
(d) When the original is a public record in the custody of
a public officer or is recorded in a public office.
The Best Evidence Rule stipulates that in proving the terms of a
written document the original of the document must be produced in
court. The rule excludes any evidence other than the original
writing to prove the contents thereof, unless the offeror proves: (a)
the existence or due execution of the original; (b) the loss and
destruction of the original, or the reason for its non-production in
court; and (c) the absence of bad faith on the part of the offeror to
which the unavailability of the original can be attributed.13
The primary purpose of the Best Evidence Rule is to ensure that
the exact contents of a writing are brought before the
court,14 considering that (a) the precision in presenting to the court
the exact words of the writing is of more than average importance,
particularly as respects operative or dispositive instruments, such
as deeds, wills and contracts, because a slight variation in words
may mean a great difference in rights; (b) there is a substantial
hazard of inaccuracy in the human process of making a copy by
handwriting or typewriting; and (c) as respects oral testimony
purporting to give from memory the terms of a writing, there is a
special risk of error, greater than in the case of attempts at
describing other situations generally.15 The rule further acts as an
insurance against fraud.16 Verily, if a party is in the possession of
the best evidence and withholds it, and seeks to substitute inferior
evidence in its place, the presumption naturally arises that the
better evidence is withheld for fraudulent purposes that its
production would expose and defeat.17 Lastly, the rule protects
against misleading inferences resulting from the intentional or
unintentional introduction of selected portions of a larger set of
writings.18
But the evils of mistransmission of critical facts, fraud, and
misleading inferences arise only when the issue relates to the
terms of the writing. Hence, the Best Evidence Rule applies only
when the terms of a writing are in issue. When the evidence
sought to be introduced concerns external facts, such as the
existence, execution or delivery of the writing, without reference to
its terms, the Best Evidence Rule cannot be invoked.19 In such a
case, secondary evidence may be admitted even without
accounting for the original.
This case involves an action for quieting of title, a common-law
remedy for the removal of any cloud or doubt or uncertainty on the
title to real property by reason of any instrument, record, claim,
encumbrance, or proceeding that is apparently valid or effective,
but is, in truth and in fact, invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title. In such an
action, the competent court is tasked to determine the respective
rights of the complainant and other claimants to place things in
their proper place and to make the one who has no rights to said
immovable respect and not disturb the other. The action is for the
benefit of both, so that he who has the right would see every cloud
of doubt over the property dissipated, and he can thereafter
fearlessly introduce any desired improvements, as well as use,
and even abuse the property. For an action to quiet title to prosper,
two indispensable requisites must concur, namely: (a) the plaintiff
or complainant has a legal or an equitable title to or interest in the
real property subject of the action; and (b) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his
title must be shown to be in fact invalid or inoperative despite its
prima facie appearance of validity or legal efficacy.20
The action for quieting of title may be based on the fact that a deed
is invalid, ineffective, voidable, or unenforceable. The terms of the
writing may or may not be material to an action for quieting of title,
depending on the ground alleged by the plaintiff. For instance,
when an action for quieting of title is based on the unenforceability
of a contract for not complying with the Statute of Frauds, Article
1403 of the Civil Code specifically provides that evidence of the
agreement cannot be received without the writing, or a secondary
evidence of its contents. There is then no doubt that the Best
Evidence Rule will come into play.
It is not denied that this action does not involve the terms or
contents of the deed of sale with right to repurchase. The principal
issue raised by the respondents as the plaintiffs, which Prodon
challenged head on, was whether or not the deed of sale with right
to repurchase, duly executed by the late Maximo Alvarez, Sr., had
really existed. They alleged in the complaint that:
xxxx
9. Such entry which could have been maliciously and deliberately
done by the defendant Margarita Prodon created cloud and [is]
prejudicial to the title of the property subject matter of this case,
since while it is apparently valid or effective, but in truth and in fact
it is invalid, ineffective or unenforceable inasmuch that the
instrument purporting to be a Deed of Sale with right of repurchase
mentioned in the said entry does not exist.21
xxxx
On her part, Prodon specifically denied the allegation, averring in
her answer that "sometime [o]n September 9, 1975, deceased
Maximo S. Alvarez lawfully entered into a Contract of Sale with
Right to Repurchase, object of which is the titled lot located at
Endaya Street, Tondo, Manila, in favor of defendant."22 In the pre-
trial order, the RTC defined the issue to be tried as "[w]hether or
not the alleged document mentioned in the said entry is existing,
valid or unenforceable,"23 and did not include the terms of the deed
of sale with right to repurchase among the issues.
Apparently, the parties were fully cognizant of the issues as
defined, for none of them thereafter ventured to present evidence
to establish the terms of the deed of sale with right to repurchase.
In the course of the trial, however, a question was propounded to
Prodon as to who had signed or executed the deed, and the
question was objected to based on the Best Evidence Rule. The
RTC then sustained the objection.24 At that point began the
diversion of the focus in the case. The RTC should have outrightly
overruled the objection because the fact sought to be established
by the requested testimony was the execution of the deed, not its
terms.25 Despite the fact that the terms of the writing were not in
issue, the RTC inexplicably applied the Best Evidence Rule to the
case and proceeded to determine whether the requisites for the
admission of secondary evidence had been complied with, without
being clear as to what secondary evidence was sought to be Do you also know the deceased plaintiff in this case, Maximo
excluded. In the end, the RTC found in its judgment that Prodon Alvarez, Sr. and his wife Valentina Clave, Mr. Witness?
had complied with the requisites for the introduction of secondary
evidence, and gave full credence to the testimony of Jose Camilon A
explaining the non-production of the original. On appeal, the CA
seconded the RTCs mistake by likewise applying the Best
Yes, sir.
Evidence Rule, except that the CA concluded differently, in that it
held that Prodon had not established the existence, execution, and
loss of the original document as the pre-requisites for the Q
presentation of secondary evidence. Its application of the Best
Evidence Rule naturally led the CA to rule that secondary evidence A
should not have been admitted, but like the RTC the CA did not
state what excluded secondary evidence it was referring to. Q

Considering that the Best Evidence Rule was not applicable Under what circumstance were you able to know the deceased
because the terms of the deed of sale with right to repurchase plaintiff Maximo Alvarez, Sr. and his wife?
were not the issue, the CA did not have to address and determine
whether the existence, execution, and loss, as pre-requisites for
When they went to our house, sir.
the presentation of secondary evidence, had been established by
Prodons evidence. It should have simply addressed and
determined whether or not the "existence" and "execution" of the When was this specifically?
deed as the facts in issue had been proved by preponderance of
evidence. A

Indeed, for Prodon who had the burden to prove the existence and Sometime the first week of September or about September 5,
due execution of the deed of sale with right to repurchase, the 1975, sir.
presentation of evidence other than the original document, like the
testimonies of Prodon and Jose Camilon, the Notarial Register of Q
Notary Eliseo Razon, and the Primary Entry Book of the Register
of Deeds, would have sufficed even without first proving the loss or
What was the purpose of the spouses Maximo and Valentina in
unavailability of the original of the deed.
meeting you on that date?

2.
A

Prodon did not preponderantly establish the existence and due

They were selling a piece of land, sir.
execution of the deed of sale with right to repurchase

xxxx
The foregoing notwithstanding, good trial tactics still required
Prodon to establish and explain the loss of the original of the deed
of sale with right to repurchase to establish the genuineness and Q
due execution of the deed.26 This was because the deed, although
a collateral document, was the foundation of her defense in this At the time when the spouses Maximo Alvarez, Sr. and Valentina
action for quieting of title.27 Her inability to produce the original Clave approached you to sell their piece of land located at Endaya,
logically gave rise to the need for her to prove its existence and Tondo, Manila, what document, if any, did they show you?
due execution by other means that could only be secondary under
the rules on evidence. Towards that end, however, it was not A
required to subject the proof of the loss of the original to the same
strict standard to which it would be subjected had the loss or
The title of the land, sir.
unavailability been a precondition for presenting secondary
evidence to prove the terms of a writing.
xxxx
A review of the records reveals that Prodon did not adduce proof
sufficient to show the lossor explain the unavailability of the Q
original as to justify the presentation of secondary evidence.
Camilon, one of her witnesses, testified that he had given the You said that on the first week of September or September 5, 1975
original to her lawyer, Atty. Anacleto Lacanilao, but that he spouses Maximo and Valentina approached you at the time, what
(Camilon) could not anymore retrieve the original because Atty. did you tell the spouses, if any?
Lacanilao had been recuperating from his heart ailment. Such
evidence without showing the inability to locate the original from A
among Atty. Lacanilaos belongings by himself or by any of his
assistants or representatives was inadequate. Moreover, a
I asked them to come back telling them that I was going to look for
duplicate original could have been secured from Notary Public
a buyer, sir.
Razon, but no effort was shown to have been exerted in that
direction.
xxxx
In contrast, the records contained ample indicia of the improbability
of the existence of the deed. Camilon claimed that the late Maximo Q
Alvarez, Sr. had twice gone to his residence in Meycauayan,
Bulacan, the first on September 5, 1975, to negotiate the sale of You said that you told the spouse[s] Alvarez to just come back later
the property in question, and the second on September 9, 1975, to and that you will look for a buyer, what happened next, if any?
execute the deed of sale with right to repurchase, viz:
A
Q
I went to see my aunt Margarita Prodon, sir.
Q A

A That Valentina Clave should come back with her husband because
she was going to buy the lot, sir.28
What did you tell your aunt Margarita Prodon?
The foregoing testimony could not be credible for the purpose of
I convinced her to buy the lot. proving the due execution of the deed of sale with right to
repurchase for three reasons.1wphi1
ATTY. REAL
The first is that the respondents preponderantly established that
the late Maximo Alvarez, Sr. had been in and out of the hospital
Q
around the time that the deed of sale with right to repurchase had
been supposedly executed on September 9, 1975. The records
What was the reply of Margarita Prodon, if any? manifested that he had been admitted to the Veterans Memorial
Hospital in Quezon City on several occasions, and had then been
A diagnosed with the serious ailments or conditions, as follows:

She agreed, provided that she should meet the spouses, sir. Period of confinement Diagnosis

Q
March 31 May 19, 1975 Prostatitis, chronic
Arteriosclerotic heart disease
After Margarita Prodon told you that[,] what happened next, if any? Atrial fibrillation
Congestive heart failure
A CFC III29

I waited for the spouses Alvarez to bring them to my aunt, sir. June 2- June 6, 1975 Chest pains (Atrial Flutter)
Painful urination (Chronic prostatitis)30
Q
August 23-September 3, 1975 Arteriosclerotic heart disease
Were you able to finally bring the spouses before Margarita Congestive heart failure, mild
Prodon? Atrial fibrillation
Cardiac functional capacity III-B31
A
September 15-October 2, 1975 Arteriosclerotic heart disease
Valentina Clave returned to our house and asked me if they can Atrial fibrillation
now sell the piece of land, sir. Congestive heart failure
Pneumonia
Q Urinary tract infection
Cerebrovascular accident, old
Upper GI bleeding probably secondary to
What did you tell Valentina Clave?
stress ulcers32

A
The medical history showing the number of very serious ailments
the late Maximo Alvarez, Sr. had been suffering from rendered it
Q highly improbable for him to travel from Manila all the way to
Meycauayan, Bulacan, where Prodon and Camilon were then
We went to the house of my aunt so she can meet her personally, residing in order only to negotiate and consummate the sale of the
sir. property. This high improbability was fully confirmed by his son,
Maximo, Jr., who attested that his father had been seriously ill, and
And did the meeting occur? had been in and out of the hospital in 1975.33 The medical records
revealed, too, that on September 12, 1975, or three days prior to
his final admission to the hospital, the late Maximo Alvarez, Sr. had
WITNESS
suffered from "[h]igh grade fever, accompanied by chills, vomiting
and cough productive of whitish sticky sputum;"had been observed
A to be "conscious" but "weak" and "bedridden" with his heart having
"faint" sounds, irregular rhythm, but no murmurs; and his left upper
Yes, sir. extremity and left lower extremity had suffered 90% motor
loss.34 Truly, Prodons allegation that the deed of sale with right to
ATTY. REAL repurchase had been executed on September 9, 1975 could not
command belief.

Q
The second is that the annotation on TCT No. 84797 of the deed of
sale with right to repurchase and the entry in the primary entry
What happened at the meeting?
book of the Register of Deeds did not themselves establish the
existence of the deed. They proved at best that a document
A purporting to be a deed of sale with right to repurchase had been
registered with the Register of Deeds. Verily, the registration alone
I told Valentina Clave in front of the aunt of my wife that they, the of the deed was not conclusive proof of its authenticity or its due
spouses, wanted to sell the land, sir. execution by the registered owner of the property, which was
precisely the issue in this case. The explanation for this is that
Q registration, being a specie of notice, is simply a ministerial act by
which an instrument is inscribed in the records of the Register of
Deeds and annotated on the dorsal side of the certificate of title
What was the reply of your aunt Margarita Prodon at the time?
covering the land subject of the instrument.35 It is relevant to
mention that the law on land registration does not require that only
valid instruments be registered, because the purpose of
registration is only to give notice.36
By the same token, the entry in the notarial register of Notary
Public Razon could only be proof that a deed of sale with right to
repurchase had been notarized by him, but did not establish the
due execution of the deed.
The third is that the respondents remaining in the peaceful
possession of the property was further convincing evidence
demonstrating that the late Maximo Alvarez, Sr. did not execute
the deed of sale with right to repurchase. Otherwise, Prodon would
have herself asserted and exercised her right to take over the
property, legally and physically speaking, upon the expiration in
1976 of the repurchase period stipulated under the deed, including
transferring the TCT in her name and paying the real property
taxes due on the properly. Her inaction was an index of the falsity
of her claim against the respondents.
In view of the foregoing circumstances, we concur with the CA that
the respondents preponderantly, proved that the deed of sale with
right to repurchase executed by the late Maximo Alvarez, Sr. did
not exist in fact.
WHEREFORE, the Court AFFIRMS the decision promulgated on
August 18, 2005 by the Court of Appeals in C.A.-G.R. CV No.
58624 entitled Heirs of Maximo S. Alvarez and Valentina Clave,
represented by Rev. Maximo Alvarez, Jr. v. Margarita Prodon and
the Register of Deeds of the City Manila; and ORDERS the
petitioners to pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 152132 July 24, 2007
LORDITO ARROGANTE, JOHNSTON ARROGANTE, ARME
ARROGANTE, and FE D. ARROGANTE,Petitioners,
vs.
BEETHOVEN DELIARTE, Joined by SPOUSE LEONORA
DUENAS, Respondents.
DECISION
NACHURA, J.:
This Petition for Review on Certiorari assails the Decision 1 dated
August 28, 2001 of the Court of Appeals (CA) in CA-G.R. CV No.
58493 which affirmed the Decision2 dated February 18, 1997 of the
Regional Trial Court (RTC), Branch 10, of Cebu City in an action
for quieting of title and damages.
It appears that the lot in controversy, Lot No. 472-A (subject lot), is
situated in Poblacion Daanbantayan, Cebu, and was originally
conjugal property of the spouses Bernabe Deliarte, Sr. and
Gregoria Placencia who had nine children, including herein
respondent Beethoven Deliarte and petitioner Fe Deliarte
Arrogante. The other petitioners, Lordito, Johnston, and Arme, Jr.,
all surnamed Arrogante, are the children of Fe and, thus, nephews
of Beethoven. Respondent Leonora Duenas is the wife of
Beethoven.
A series of misfortunes struck the Deliarte family. The first tragedy
occurred when a brother of Beethoven and Fe was hospitalized
and eventually died in Davao. Beethoven shouldered the
hospitalization and other related expenses, including the transport
of the body from Davao to Cebu and then to Daanbantayan.
The next occurrence took place a year after, when Gregoria was
likewise hospitalized and subsequently died on July 29, 1978.
Once again, Beethoven paid for all necessary expenses. Soon
thereafter, it was Bernabe, the parties ailing father, who died on
November 7, 1980. Not surprisingly, it was Beethoven who spent
for their fathers hospitalization and burial.
In between the deaths of Gregoria and Bernabe, on November 16,
1978, the Deliarte siblings agreed to waive and convey in favor of
Beethoven all their rights, interests, and claims to the subject lot in
consideration ofP15,000.00.3 At the signing of the deed of absolute
sale, the siblings who failed to attend the family gathering, either
because they were dead or were simply unable to, were
represented by their respective spouses who signed the document
on their behalf.4 Bernabe, who was already blind at that time, was
likewise present and knew of the sale that took place among his
children.
Thus, from then on, Beethoven occupied and possessed the
subject lot openly, peacefully, and in the concept of owner. He
exercised full ownership and control over the subject lot without
any objection from all his siblings, or their heirs, until 1993 when
the controversy arose.5 In fact, on March 26, 1986, all of
Beethovens siblings, except Fe, signed a deed of confirmation of
sale in favor of Beethoven to ratify the 1978 private deed of sale.
Sometime in August 1993, petitioner Lordito Arrogante installed
placards on the fence erected by respondents, claiming that the
subject lot was illegally acquired by the latter.6 The placards
depicted Beethoven as a land grabber who had unconscionably
taken the subject lot from Lordito who claimed that the lot is a
devise from his grandfather.7 Allegedly, the bequeathal was made
in Bernabes last will and testament which was, unfortunately, torn
up and destroyed by Beethoven.8
Thus, on November 10, 1993, respondents filed an action for
quieting of title and damages against the petitioners.
In their answer, the petitioners averred that Beethoven does not
own the whole of the subject lot because Bernabe was still alive in
1978 when Beethovens siblings sold to him all their rights and
claims to and interests in that lot. Thus, the siblings could sell only
their respective inheritance from one-half of the subject lot,
representing Gregorias share in the conjugal property. Corollarily,
the petitioners claimed that Fe continues to own 1/9 of one-half of
the subject lot, comprising Bernabes share of the property, which
allegedly was not contemplated in the conveyance in 1978.
According to petitioners, this contention is supported by Fes
failure to sign the deed of confirmation of sale in 1986.
As regards the damaging placards, the petitioners asseverated
that Lordito acted on his own when he installed the same, and that
this was resorted to merely to air his grievance against his uncle,
Beethoven, for claiming ownership of the entire lot.
After trial, the RTC rendered a Decision quieting title on the subject
lot in favor of respondents and directing petitioners, jointly and
severally, to pay the respondents P150,000.00 as moral
damages, P25,000.00 as attorneys fees, and P10,000.00 as
litigation expenses.
On appeal, the CA affirmed the trial courts decision but deleted the
award of attorneys fees and litigation expenses. In ruling for the
respondents, both the trial and appellate courts upheld the validity
of the 1978 sale as between the parties. Considering that
petitioner Fe signed the document and consented to the
transaction, she is now barred from repudiating the terms thereof.
In this regard, the RTC and the CA applied the parole evidence
rule and allowed the introduction of evidence on the additional
consideration for the conveyance, namely, the expenses incurred
by Beethoven during the three tragedies that had befallen the
Deliarte family. Both courts found that the sale was already
completely executed, thus removing it from the ambit of the Statute
of Frauds.9
As for the award of moral damages, the trial and appellate courts
held that the other petitioners failure to prevent Lordito from
putting up, or at least, removing the placards, amounted to the
defamation and opprobrium of Beethoven with their knowledge
and acquiescence. Thus, the assessment of moral damages was
appropriate, given the humiliation and embarrassment suffered by
Beethoven considering his stature and reputation in the community
as an electrical engineer handling several big projects.
However, petitioners insist that the lower courts erred in their
rulings. They maintain that the 1978 sale did not contemplate the
alienation of Bernabes share in the conjugal partnership as he
failed to sign the private document. As such, the courts application
of the parole evidence rule and the Statute of Frauds were
erroneous. In the same vein, the petitioners posit that both courts
ruling that they are jointly and severally liable for moral damages is
inconsistent with the evidence on record that Lordito was the sole
author of the damaging placards.
In this appeal, the issues for the resolution of this Court are:
I.
WHETHER OR NOT THE PRIVATE DEED OF SALE
EXECUTED IN 1978 IS A VALID CONVEYANCE OF
THE ENTIRE LOT 472-A TO PETITIONER BEETHOVEN
DELIARTE.
II.
WHETHER OR NOT THE PAROLE EVIDENCE RULE IS
APPLICABLE TO THIS CASE.
III.
WHETHER OR NOT THE STATUTE OF FRAUDS IS
APPLICABLE TO THIS CASE.
IV.
WHETHER OR NOT THE PETITIONERS ARE JOINTLY
AND SEVERALLY LIABLE FOR MORAL DAMAGES.
At the outset, we note that both the lower and the appellate courts
failed to identify the applicable law.
First. The 1978 private deed of sale, insofar as it disposed of
Bernabes share in the conjugal partnership prior to his death, is
void for being a conveyance of the Deliarte siblings future
inheritance.
Article 1347, paragraph 2 of the Civil Code characterizes a
contract entered into upon future inheritance as void.10 The law
applies when the following requisites concur: (1) the succession
has not yet been opened; (2) the object of the contract forms part
of the inheritance; and (3) the promissor has, with respect to the
object, an expectancy of a right which is purely hereditary in
nature.11
In this case, at the time the contract was entered into, succession
to Bernabes estate had yet to be opened, and the object thereof,
i.e., Bernabes share in the subject lot, formed part of his childrens
inheritance, and the children merely had an inchoate hereditary
right thereto.
True, the prohibition on contracts respecting future inheritance
admits of exceptions, as when a person partitions his estate by an
act inter vivos under Article 1080 of the Civil Code.12 However, the
private deed of sale does not purport to be a partition of Bernabes
estate as would exempt it from the application of Article 1347.
Nowhere in the said document does Bernabe separate, divide, and
assign to his children his share in the subject lot effective only
upon his death.13 Indeed, the document does not even bear the
signature of Bernabe.
Neither did the parties demonstrate that Bernabe undertook an
oral partition of his estate. Although we have held on several
occasions that an oral or parole partition is valid, our holdings
thereon were confined to instances wherein the partition had
actually been consummated, enforced, and recognized by the
parties.14 Absent a showing of an overt act by Bernabe indicative of
an unequivocal intent to partition his estate among his children, his
knowledge and ostensible acquiescence to the private deed of
sale does not equate to an oral partition by an act inter vivos.
Besides, partition of property representing future inheritance
cannot be made effective during the lifetime of its owner.15
Considering the foregoing, it follows that the 1986 deed of
confirmation of sale which sought to ratify the 1978 sale likewise
suffers from the same infirmity.16 In short, the 1986 deed is also
void.
Nevertheless, it is apparent that Bernabe treated his share 17 in the
subject lot as his childrens present inheritance, and he
relinquished all his rights and claim thereon in their favor subject to
Beethovens compensation for the expenses he initially shouldered
for the family. The records reveal that Bernabe, prior to his
hospitalization and death, wanted to ensure that his children
attended to the expenditure relating thereto, and even articulated
his desire that such surpass the provision for both his son and
wife, Beethovens and Fes brother and mother,
respectively.18 Their arrangement contemplated the Deliarte
siblings equal responsibility for the familys incurred expenses.
We take judicial notice of this collective sense of responsibility
towards family. As with most nuclear Filipino families, the Deliarte
siblings endeavored to provide for their parents or any member of
their family in need. This was evident in Florenda Deliarte Nacuas,
the youngest Deliarte siblings, remittance to her parents of her
salary for two years so they could redeem the subject lot.19
Florenda corroborated the testimony of Beethoven that their father
was present during, and was aware of, the transaction that took
place among his children.20 The 1978 deed of sale, albeit void,
evidenced the consent and acquiescence of each Deliarte sibling
to said transaction. They raised no objection even after Beethoven
forthwith possessed and occupied the subject lot.
The foregoing arrangement, vaguely reflected in the void deed of
sale, points to a meeting of the minds among the parties
constitutive of an innominate contract, akin to both an onerous and
a remuneratory donation.21 In this regard, Bernabes waiver and
relinquishment of his share in the subject lot is effectively a
donation inter vivos to his children. However, the gratuitous act is
coupled with an onerous cause equal accountability of the
Deliarte siblings for the hospitalization and death expenses of
deceased family members to be taken from their shares in the
subject lot. In turn, the remunerative cause pertains to Beethovens
recompense for the family expenses he initially shouldered.
During his lifetime, Bernabe remained the absolute owner of his
undivided interest in the subject lot. Accordingly, he could have
validly disposed of his interest therein. His consent to the
disposition of the subject lot in favor of Beethoven, agreed upon
among his children, is evident, considering his presence in,
knowledge of, and acquiescence to the transaction. Further, the
arrangement was immediately effected by the parties with no
objection from Bernabe or any of the Deliarte siblings, including
herein petitioner Fe. Ineluctably, the actual arrangement between
the parties included Bernabe, and the object thereof did not
constitute future inheritance.
Second. The parole evidence rule is applicable. While the
application thereof presupposes the existence of a valid
agreement, the innominate contract between the parties has been
directly put in issue by the respondents. Verily, the failure of the
deed of sale to express the true intent and agreement of the
parties supports the application of the parole evidence rule.22
Contrary to petitioners contention, the absence of Bernabes
signature in the 1978 deed of sale is not necessarily conclusive of
his dissent or opposition to the effected arrangement. As
previously adverted to, the agreement had multiple causes or
consideration, apart from the P15,000.00 stated in the deed of
sale. To repeat, the agreement between the parties had both an
onerous and a remunerative cause. Also worthy of note is the
moral consideration for the agreement given the relationship
between the parties.
Third. We agree with both the lower and the appellate courts that
the Statute of Frauds is not applicable to the instant case.
The general rule is that contracts are valid in whatever form they
may be.23 One exception thereto is the Statute of Frauds which
requires a written instrument for the enforceability of a
contract.24 However, jurisprudence dictates that the Statute of
Frauds only applies to executory, not to completed, executed, or
partially consummated, contracts.25
In the case at bench, we find that all requisites for a valid contract
are present, specifically: (1) consent of the parties; (2) object or
subject matter, comprised of the parties respective shares in the
subject lot; and (3) the consideration, over and above
the P15,000.00 stipulated price. We note that the agreement
between the parties had long been consummated and completed.
In fact, the agreement clearly contemplated immediate execution
by the parties. More importantly, the parties, including petitioner
Fe, ratified the agreement by the acceptance of benefits
thereunder.26
One other thing militates against Fes claim of ownership - silence
and palpable failure to object to the execution of the agreement.
Fe insists that she only intended to sell her share of the lot
inherited from her mothers estate, exclusive of her fathers share
therein.
We are not persuaded by the belated claim. This afterthought is
belied by the express stipulations in the 1978 deed of sale that the
heirs of Bernabe and Gregoria, absolutely sell, quitclaim, and
transfer the subject lot in favor of Beethoven. Although a void
contract is not a source of rights and obligations between the
parties, the provisions in the written agreement and their signature
thereon are equivalent to an express waiver of all their rights and
interests in the entire lot in favor of Beethoven, regardless of which
part pertained to their mothers or fathers estate.
Truly significant is the fact that in all the years that Beethoven
occupied the subject lot, Fe never disturbed the former in his
possession. Neither did she present her other siblings to buttress
her contradicting claim over the subject lot. Likewise, she never
asked for a partition of the property even after the death of their
father, Bernabe, to settle his estate, or when her other siblings
executed the deed of confirmation of sale in 1986. Fe also does
not pretend to share in the payment of realty taxes thereon, but
merely advances the claim that Priscillana, one of their siblings,
had already paid said taxes.27 Ultimately, petitioner Fe is estopped
from staking a claim on the subject lot and wresting ownership
therein from Beethoven.
Our holding in the case of Tinsay v. Yusay28 is still good law, thus:
Juana Servando not being a party to the partition agreement
Exhibit 1, the agreement standing alone was, of course, ineffective
as against her. The attempt to partition her land among her heirs,
constituting a partition of future inheritance was invalid under the
second paragraph of Article 1271 of the Civil Code and for the
same reason the renunciation of all interest in the land which now
constitutes lots Nos. 241 and 713 made by the appellants in favor
of the children of Jovito Yusay would likewise be of no binding
force as to the undivided portion which belonged to Juan
Servando. But if the parties entered into the partition agreement in
good faith and treated all of the land as a present inheritance, and
if the appellants on the strength of the agreement obtained their
Torrens title to the land allotted to them therein, and if Perpetua
Sian in reliance on the appellants renunciation of all interest
claimed by her on behalf of her children in the cadastral case
refrained from presenting any opposition to the appellants claim to
the entire fee in the land assigned to them in the partition
agreement and if the appellants after the death of Juana Servando
continued to enjoy the benefits of the agreement refusing to
compensate the heirs of Jovito Yusay for the latters loss of their
interest in lots Nos. 2 and 744 through the registration of the lots in
the name of the appellants and the subsequent alienation of the
same to innocent third parties, said appellants are now estopped
from repudiating the partition agreement of 1911 and from claiming
any further interest in lots Nos. 241 and 713. There is, however, no
reason why they should not be allowed to share in the distribution
of the other property left by Juana Servando.
Fourth. As to the lower courts award of moral damages, we
sustain respondents entitlement thereto. Undeniably, respondents
suffered besmirched reputation, wounded feelings, and social
humiliation due to the damaging placards.29 The injury is
aggravated because of the relationship among the parties.
Respondent Beethoven was able to prove that his nephews,
petitioners Lordito, Johnston, and Arme, Jr., stayed with him at
some point, and that he financially supported and trained them to
be electricians.30
Yet, Lordito denies malice in the aforesaid act. He argues that his
only quarrel with Beethoven stems from the latters claim of
ownership over the subject lot which was, supposedly, already
bequeathed to him by his grandfather, Bernabe. Lordito maintains
that his claim is valid, supported by a will Beethoven had torn up,
which allegedly negates malice in his act of putting up the
placards.
We are not convinced.
To begin with, the supposed devise to Lordito appears to be void.
Considering that Bernabes estate consisted merely of his conjugal
share in the subject lot, the bequeathal infringes on his compulsory
heirs legitimes, including that of Lorditos mother, Fe. 31 Lorditos
claim, therefore, is only subordinate to Beethovens claim as a
compulsory heir, even without delving into the innominate contract
between the parties. In all, the ascription of malice and Lorditos
corresponding liability for moral damages is correct given the
words he employed in the placards.
However, we agree with petitioners that there is a dearth of
evidence pointing to their collective responsibility for Lorditos act.
Corollary thereto, Lordito admits and claims sole responsibility for
putting up the placards. The other petitioners specific participation
in the tortious act was not proven. Failure to prevent Lordito or
command him to remove the placards, alone, does not justify the
finding that all the petitioners are jointly and severally liable. It does
not suffice that all the petitioners were moved by a common desire
to acquire the subject property, absent any proof that they
individually concurred in Lorditos act.
Entrenched is the rule that "the rights of a party cannot be
prejudiced by an act, declaration, or omission of another." 32 The
exception under Section 32, Rule 130 of the Rules of Court does
not obtain in this instance. The other petitioners acquiescence to
and apparent concurrence in Lorditos act cannot be inferred
merely from their failure to remove the placards or reprimand
Lordito. While the placards indeed defamed Beethoven, there is
nothing that directly links the other petitioners to this dastardly act.
WHEREFORE, premises considered, the petition is PARTIALLY
GRANTED. The August 28, 2001 Decision of the Court of Appeals
is hereby MODIFIED. Petitioner Lordito Arrogante is held solely
liable to respondents for moral damages in the amount
of P150,000.00. The quieting of title in favor of respondents is
hereby AFFIRMED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149844 October 13, 2004
MIGUEL CUENCO, Substituted by MARIETTA C.
CUYEGKENG, petitioner,
vs.
CONCEPCION CUENCO Vda. DE MANGUERRA, respondent.
DECISION
PANGANIBAN, J.:
Inasmuch as the facts indubitably and eloquently show an implied
trust in favor of respondent, the Court of Appeals did not err in
affirming the Decision of the Regional Trial Court ordering
petitioner to convey the subject property to her. That Decision
satisfied the demands of justice and prevented unjust enrichment.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of
Court, challenging the August 22, 2001 Decision2 of the Court of
Appeals (CA) in CA-GR CV No. 54852. The assailed Decision
disposed as follows:
"WHEREFORE, the decision appealed from is
AFFIRMED."3
On the other hand, the Regional Trial Court (RTC) Decision
affirmed by the CA disposed as follows:
"WHEREFORE, considering that this action is essentially
one for reconveyance or enforcement of a trust,
judgment is hereby rendered ordering the substituted
defendant Marietta Cuenco Cuyegkeng to reconvey or
transfer, in a duly registrable public instrument, Lot No
903-A-6 under TCT No. 113781 of the Registry of Deeds
of Cebu City, of the Banilad Estate with an area of 834
square meters, in favor of plaintiff Concepcion Cuenco
Vda. De Manguerra; or should the substituted defendant,
for one reason or another, fail to execute the necessary
instrument once the decision becomes final, the Clerk of
Court of this Court (RTC) is hereby instructed, in
accordance with the Rules of Court, to prepare and
execute the appropriate and requisite conveyance and
instrument in favor of herein plaintiff which, in either
case, shall be registered with the Office of the Register of
Deeds of Cebu City.
Without costs in this instance."4
The Facts
The facts were summarized by the appellate court as follows:
"On September 19, 1970, the [respondent] filed the
initiatory complaint herein for specific performance
against her uncle [Petitioner] Miguel Cuenco which
averred, inter alia that her father, the late Don Mariano
Jesus Cuenco (who became Senator) and said
[petitioner] formed the Cuenco and Cuenco Law Offices;
that on or around August 4, 1931, the Cuenco and
Cuenco Law Offices served as lawyers in two (2) cases
entitled Valeriano Solon versus Zoilo Solon (Civil Case
9037) and Valeriano Solon versus Apolonia Solon (Civil
Case 9040) involving a dispute among relatives over
ownership of lot 903 of the Banilad Estate which is near
the Cebu Provincial Capitol; that records of said cases
indicate the name of the [petitioner] alone as counsel of
record, but in truth and in fact, the real lawyer behind the
success of said cases was the influential Don Mariano
Jesus Cuenco; that after winning said cases, the
awardees of Lot 903 subdivided said lot into three (3)
parts as follows:
Lot 903-A: 5,000 [square meters]: Mariano
Cuencos attorneys fees
Lot 903-B: 5,000 [square meters]: Miguel
Cuencos attorneys fees
Lot 903-C: 54,000 [square meters]: Solons
retention
"That at the time of distribution of said three (3) lots in
Cebu, Mariano Jesus Cuenco was actively practicing law
in Manila, and so he entrusted his share (Lot 903-A) to
his brother law partner (the [petitioner]); that on
September 10, 1938, the [petitioner] was able to obtain in
his own name a title for Lot 903-A (Transfer Certificate of
Title [TCT] RT-6999 [T-21108]); that he was under the
obligation to hold the title in trust for his brother Marianos
children by first marriage; that sometime in 1947, the
Cuenco family was anticipating Marianos second
marriage, and so on February 1, 1947, they partitioned
Lot 903-A into six (6) sub-lots (Lots 903-A-1 to 903-A-6)
to correspond to the six (6) children of Marianos first
marriage (Teresita, Manuel, Lourdes, Carmen, Consuelo,
and Concepcion); that the [petitioner] did not object nor
oppose the partition plan; that on June 4, 1947, the
[petitioner] executed four (4) deeds of donation in favor of
Marianos four (4) children: Teresita, Manuel, Lourdes,
and Carmen, pursuant to the partition plan (per notary
documents 183, 184, 185, 186, Book III, Series 1947 of
Cebu City Notary Public Candido Vasquez); that on June
24, 1947, the [petitioner] executed the fifth deed of
donation in favor of Marianos fifth child Consuelo (per
notary document 214, Book III, Series 1947 of Cebu City
Notary Public Candido Vasquez) (Exhibits 2 to 5); that
said five (5) deeds of donation left out Marianos sixth
child Concepcion who later became the [respondent]
in this case; that in 1949, [respondent] occupied and
fenced a portion of Lot 903-A-6 for taxation purposes
(Exhibit F, Exhibit 6); that she also paid the taxes
thereon (Exhibit G); that her father died on February 25,
1964 with a Last Will and Testament; that the pertinent
portion of her fathers Last Will and Testament bequeaths
the lot.
near the Cebu provincial capitol, which were
my attorneys fees from my clients, Victoria
Rallos and Zoilo Solon, respectively have
already long been disposed of, and distributed
by me, through my brother, Miguel, to all my
said children in the first marriage;
"That on June 3, 1966, the [petitioner] wrote a letter
petitioning the Register of Deeds of Cebu to transfer Lot
903-A-6 to his name on the ground that Lot 903-A-6 is a
portion of Lot 903-A; that on April 6, 1967, the
[respondent] requested the Register of Deeds to
annotate an affidavit of adverse claim against the
[petitioners] TCT RT-6999 (T-21108) which covers Lot
903-A; that on June 3, 1967, the Register of Deeds
issued TCT 35275 covering Lot 903-A-6 in the name of
the [petitioner] but carrying the earlier annotation of
 adverse claim; that in 1969, the [petitioner] tore down the
wire fence which the [respondent] constructed on Lot
903-A-6 which compelled the latter to institute the instant
complaint dated August 20, 1970 on September 19,
1970.
"On December 5, 1970, the answer with counterclaim
dated December 3, 1970 of [petitioner] Miguel Cuenco
was filed where he alleged that he was the absolute
owner of Lot 903-A-6; that this lot was a portion of Lot
903-A which in turn was part of Lot 903 which was the
subject matter of litigation; that he was alone in
defending the cases involving Lot 903 without the
participation of his brother Mariano Cuenco; that he
donated five (5) of the six (6) portions of Lot 903-A to the
five (5) children of his brother Mariano out of gratitude for
the love and care they exhibited to him (Miguel) during
the time of his long sickness; that he did not give or
donate any portion of the lot to the [respondent] because
she never visited him nor took care of him during his long
sickness; that he became critically ill on February 11,
1946 and was confined at the Singians Clinic in Manila
and then transferred to Cebu where he nearly died in
1946; that his wife Fara Remia Ledesma Cuenco had an
operation on January 1951 and was confined at the
University of Santo Tomas Hospital and John Hopkins
Hospital in the United States; that two of his children died
at the University of Santo Tomas Hospital in 1951 and
1952; and that his wife was blind for many months due to
malignant hypertension but [respondent] never
remembered her nor did she commiserate with him and
his wife in their long period of sorrow.
"[Petitioner] Miguel Cuenco took the witness stand as
early as September 13, 1974. His self-conducted direct
examination lasted until 1985, the last one on November
22, 1985. Unfortunately, he died5 before he was able to
submit himself for cross-examination and so his
testimony had to be stricken off the record. His only
surviving daughter, Marietta Cuyegkeng, stood as the
substitute [petitioner] in this case. She testified that she
purchased Lot 903-A-6 (the property subject matter of
this case) from her late father sometime in 1990 and
constructed a house thereon in the same year; that she
became aware of this case because her late father used
to commute to Cebu City to attend to this case; and that
Lot 903-A-6 is in her name per Transfer Certificate of
Title #113781 of the Registry of Deeds for Cebu."6
Ruling of the Court of Appeals
The CA found respondents action not barred by res judicata,
because there was "no identity of causes of action between the
Petition for cancellation of adverse claim in L.R.C. Records 5988
and the Complaint for specific performance to resolve the issue of
ownership in Civil Case No. R-11891."
The appellate court further found no reason to disturb the findings
of the trial court that respondent "has the legal right of ownership
over lot 903-A-6." The CA ruled that the subject land "is part of the
attorneys fees of Don Mariano Cuenco, predecessor-in-interest of
[Respondent] Concepcion Cuenco vda. de Manguerra and
[petitioner] merely holds such property in trust for [her], his title
there[to] notwithstanding."
Finally, the CA held that the right of action of respondent "has not
yet prescribed as she was in possession of the lot in dispute and
the prescriptive period to file the case commences to run only from
the time she acquired knowledge of an adverse claim over [her]
possession."
Hence, this Petition.7
The Issues
In her Memorandum, petitioner raises the following issues for our
consideration:
"I.
On question of law, the Court of Appeals failed to
consider facts of substance and significance which, if
considered, will show that the preponderance of
evidence is in favor of the petitioner.
"II.
On question of law, the Court of Appeals failed to
appreciate the proposition that, contrary to the position
taken by the trial court, no constructive or implied trust
exists between the parties, and neither is the action one
for reconveyance based upon a constructive or implied
trust.
"III.
On question of law, the Court of Appeals erred in not
finding that even where implied trust is admitted to exist
the respondents action for relief is barred by laches and
prescription.
"IV.
On question of law, the trial court and the appellate court
erred in expunging from the records the testimony of
Miguel Cuenco."8
This Courts Ruling
The Petition has no merit.
First Issue:
Evaluation of Evidence
Petitioner asks us to appreciate and weigh the evidence offered in
support of the finding that Lot 903-A-6 constituted a part of
Mariano Cuencos share in the attorneys fees. In other words, she
seeks to involve us in a reevaluation of the veracity and probative
value of the evidence submitted to the lower court. What she
wants us to do is contrary to the dictates of Rule 45 that only
questions of law may be raised and resolved in a petition for
review. "Absent any whimsical or capricious exercise of judgment,
and unless the lack of any basis for the conclusions made by the
lower courts be amply demonstrated, the Supreme Court will not
disturb such factual findings."9
As a rule, findings of fact of the Court of Appeals affirming those of
the trial court are binding and conclusive. Normally, such factual
findings are not disturbed by this Court, to which only questions of
law may be raised in an appeal by certiorari.10 This Court has
consistently ruled that these questions "must involve no
examination of the probative value of the evidence presented by
the litigants or any of them."11 Emphasizing the difference between
the two types of question, it has explained that "there is a question
of law in a given case when the doubt or difference arises as to
what the law is pertaining to a certain state of facts, and there is a
question of fact when the doubt arises as the truth or the falsity of
alleged facts."12
Indeed, after going over the records of the present case, we are
not inclined to disturb the factual findings of the trial and the
appellate courts, just because of the insistent claim of petitioner.
His witnesses allegedly testified that Civil Case No. 9040 involving
Lot 903 had not been handled by Mariano for defendants therein --
Apolonia Solon, Zoilo Solon, et al. It has sufficiently been proven,
however, that these defendants were represented by the Cuenco
and Cuenco Law Office, composed of Partners Mariano Cuenco
and Miguel Cuenco.
Given as attorneys fees was one hectare of Lot 903, of which two
five-thousand square meter portions were identified as Lot 903-A
and Lot 903-B. That only Miguel handled Civil Case No. 9040 does
not mean that he alone is entitled to the attorneys fees in the said
cases. "When a client employs the services of a law firm, he does
not employ the services of the lawyer who is assigned to
personally handle the case. Rather, he employs the entire law
firm."13 Being a partner in the law firm, Mariano -- like Miguel -- was
likewise entitled14 to a share in the attorneys fees from the firms
clients. Hence, the lower courts finding that Lot 903-A was a part
of Mariano Cuencos attorneys fees has ample support.
Second Issue:
Implied Trust
Petitioner then contends that no constructive or implied trust exists
between the parties.
A trust is a legal relationship between one having an equitable
ownership in a property and another having legal title to it.15
Trust relations between parties may either be express or
implied.16 Express trusts are created by the direct and positive acts
of the parties, indicated through some writing, deed, will, or words
evidencing an intention to create a trust.17 On the other hand,
implied trusts are those that, "without being express, are deducible
from the nature of the transaction as matters of intent[;] or which
are superinduced on the transaction by operation of law as a
matter of equity, independently of the particular intention of the
parties. Implied trusts may either be resulting or constructive
trusts, both coming into being by operation of law."18
Resulting trusts are presumed to have been contemplated by the
parties and are based on the equitable doctrine that valuable
consideration, not legal title, determines the equitable title or
interest.19 These trusts arise from the nature of or the
circumstances involved in a transaction, 20 whereby legal title
becomes vested in one person, who is obligated in equity to hold
that title for the benefit of another.
Constructive trusts are "created by the construction of equity in
order to satisfy the demands of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good
conscience, to hold."21
A review of the records shows that indeed there is an implied trust
between the parties.
Although Lot 903-A was titled in Miguels name, the circumstances
surrounding the acquisition and the subsequent partial dispositions
of this property eloquently speak of the intent that the equitable or
beneficial ownership of the property should belong to Mariano and
his heirs.
First, Lot 903-A was one half of the one-hectare portion
of Lot 903 given as attorneys fees by a client of the law
firm of Partners Miguel and Mariano Cuenco. It
constituted the latters share in the attorneys fees and
thus equitably belonged to him, as correctly found by the
CA. That Lot 903-A had been titled in the name of Miguel
gave rise to an implied trust between him and Mariano,
specifically, the former holds the property in trust for the
latter. In the present case, it is of no moment that the
implied trust arose from the circumstance -- a share in
the attorneys fees -- that does not categorically fall under
Articles 1448 to 1456 of the Civil Code. The cases of
implied trust enumerated therein "does not exclude
others established by the general law of trust."22
Second, from the time it was titled in his name in
1938,23 Lot 903-A remained undivided and untouched24by
Miguel. Only on February 3, 1947, did Lourdes
Cuenco,25 upon the instruction of Mariano, have it
surveyed and subdivided into six almost equal portions --
903-A-1 to 903-A-6. Each portion was specifically
allocated to each of the six children of Mariano with his
first wife.26
Third, Miguel readily surrendered his Certificate of
Title27 and interposed no objection28 to the subdivision
and the allocation of the property to Marianos six
children, including Concepcion.
Fourth, Marianos children, including Concepcion,29 were
the ones who shouldered the expenses incurred for the
subdivision of the property.
Fifth, after the subdivision of the property, Marianos
children -- including Concepcion30 -- took possession of
their respective portions thereof.
Sixth, the legal titles to five portions of the property were
transferred via a gratuitous deed of conveyance to
Marianos five children, following the allocations specified
in the subdivision plan prepared for Lourdes Cuenco.31
With respect to Lot 903-A-6 in particular, the existence of
Concepcions equitable ownership thereof is bolstered, not just by
the above circumstances, but also by the fact that respondent
fenced the portion allocated to her and planted trees thereon. 32
More significantly, she also paid real property taxes on Lot 903-A-6
yearly, from 1956 until 196933 -- the year when she was
dispossessed of the property. "Although tax declarations or realty
tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in
the concept of owner, for no one in his right mind would be paying
taxes for a property that is not in his actual or at least constructive
possession."34 Such realty tax payments constitute proof that the
holder has a claim of title over the property.
Tellingly, Miguel started paying real property taxes on Lot 903-A-6
only on April 4, 1964,35 after the death of Mariano.36 This fact
shows that it was only in that year that he was emboldened to
claim the property as his own and to stop recognizing Marianos,
and subsequently Concepcions, ownership rights over it. It was
only by then that the one who could have easily refuted his claim
had already been silenced by death. Such a situation cannot be
permitted to arise, as will be explained below.
Estoppel
From the time Lot 903-A was subdivided and Marianos six
children -- including Concepcion -- took possession as owners of
their respective portions, no whimper of protest from petitioner was
heard until 1963. By his acts as well as by his omissions, Miguel
led Mariano and the latters heirs, including Concepcion, to believe
that Petitioner Cuenco respected the ownership rights of
respondent over Lot 903-A-6. That Mariano acted and relied on
Miguels tacit recognition of his ownership thereof is evident from
his will, executed in 1963, which states:
"I hereby make it known and declare that x x x all
properties which my first wife and I had brought to, or
acquired during our marriage, or which I had acquired
during the years I was a widower including jewelry, war
damage compensation, and two other lots also located at
Cebu City, one near the South-Western University and
the other near the Cebu provincial capitol, which were my
attorneys fees from my clients, Victoria Rallos and Zoilo
Solon, respectively have already long been disposed
of, and distributed by me, through my brother, Miguel, to
 all my said six children in the first marriage."37 (emphasis
supplied)
Indeed, as early as 1947, long before Mariano made his will in
1963, Lot 903-A -- situated along Juana Osmea Extension,
Kamputhaw, Cebu City,38 near the Cebu Provincial Capitol -- had
been subdivided and distributed to his six children in his first
marriage. Having induced him and his heirs to believe that Lot
903-A-6 had already been distributed to Concepcion as her own,
petitioner is estopped from asserting the contrary and claiming
ownership thereof.
The principle of estoppel in pais applies when -- by ones acts,
representations, admissions, or silence when there is a need to
speak out -- one, intentionally or through culpable negligence,
induces another to believe certain facts to exist; and the latter
rightfully relies and acts on such belief, so as to be prejudiced if
the former is permitted to deny the existence of those facts. 39
Third Issue:
Laches
Petitioner claims that respondents action is already barred by
laches.
We are not persuaded. Laches is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the
party entitled to it has either abandoned or declined to assert it. 40 In
the present case, respondent has persistently asserted her right to
Lot 903-A-6 against petitioner.
Concepcion was in possession as owner of the property from 1949
to 1969.41 When Miguel took steps to have it separately titled in his
name, despite the fact that she had the owners duplicate copy of
TCT No. RT-6999 -- the title covering the entire Lot 903-A -- she
had her adverse claim annotated on the title in 1967. When
petitioner ousted her from her possession of the lot by tearing
down her wire fence in 1969,42 she commenced the present action
on September 19, 1970,43 to protect and assert her rights to the
property. We find that she cannot be held guilty of laches, as she
did not sleep on her rights.
Fourth Issue:
Expunging of Testimony
Petitioner Cuyegkeng questions the expunging of the direct
testimony of Miguel Cuenco. Respondent points out that this issue
was not raised before the CA. Neither had petitioner asked the trial
court to reconsider its Order expunging the testimony. Hence, this
issue cannot for the first time be raised at this point of the appeal.
Issues, arguments and errors not adequately and seriously
brought below cannot be raised for the first time on appeal.44"Basic
considerations of due process impel this rule."45
WHEREFORE, the Petition is DENIED, and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167812 December 19, 2006
JESUS M. GOZUN, petitioner,
vs.
JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO
MERCADO, respondent.
DECISION
CARPIO MORALES, J.:
On challenge via petition for review on certiorari is the Court of
Appeals Decision of December 8, 2004 and Resolution of April 14,
2005 in CA-G.R. CV No. 763091 reversing the trial courts
decision2 against Jose Teofilo T. Mercado a.k.a. Don Pepito
Mercado (respondent) and accordingly dismissing the complaint of
Jesus M. Gozun (petitioner).
In the local elections of 1995, respondent vied for the gubernatorial
post in Pampanga. Upon respondents request, petitioner, owner of
JMG Publishing House, a printing shop located in San Fernando,
Pampanga, submitted to respondent draft samples and price
quotation of campaign materials.
By petitioners claim, respondents wife had told him that
respondent already approved his price quotation and that he could
start printing the campaign materials, hence, he did print campaign
materials like posters bearing respondents photograph,3 leaflets
containing the slate of party candidates,4 sample ballots,5 poll
watcher identification cards,6 and stickers.
Given the urgency and limited time to do the job order, petitioner
availed of the services and facilities of Metro Angeles Printing and
of St. Joseph Printing Press, owned by his daughter Jennifer
Gozun and mother Epifania Macalino Gozun, respectively.7
Petitioner delivered the campaign materials to respondents
headquarters along Gapan-Olongapo Road in San Fernando,
Pampanga.8
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian
Soriano (Lilian) obtained from petitioner "cash advance"
of P253,000 allegedly for the allowances of poll watchers who
were attending a seminar and for other related expenses. Lilian
acknowledged on petitioners 1995 diary9 receipt of the amount.10
Petitioner later sent respondent a Statement of Account 11 in the
total amount of P2,177,906 itemized as follows:P640,310 for JMG
Publishing House; P837,696 for Metro Angeles Printing; P446,900
for St. Joseph Printing Press; and P253,000, the "cash advance"
obtained by Lilian.
On August 11, 1995, respondents wife partially paid P1,000,000 to
petitioner who issued a receipt12 therefor.
Despite repeated demands and respondents promise to pay,
respondent failed to settle the balance of his account to petitioner.
Petitioner and respondent being compadres, they having been
principal sponsors at the weddings of their respective daughters,
waited for more than three (3) years for respondent to honor his
promise but to no avail, compelling petitioner to endorse the matter
to his counsel who sent respondent a demand
letter.13 Respondent, however, failed to heed the demand.14
Petitioner thus filed with the Regional Trial Court of Angeles City
on November 25, 1998 a complaint15 against respondent to collect
the remaining amount of P1,177,906 plus "inflationary adjustment"
and attorneys fees.
In his Answer with Compulsory Counterclaim,16 respondent denied
having transacted with petitioner or entering into any contract for
the printing of campaign materials. He alleged that the various
campaign materials delivered to him were represented as
donations from his family, friends and political supporters. He
added that all contracts involving his personal expenses were
coursed through and signed by him to ensure compliance with
pertinent election laws.
On petitioners claim that Lilian, on his (respondents) behalf, had
obtained from him a cash advance of P253,000, respondent
denied having given her authority to do so and having received the
same.
At the witness stand, respondent, reiterating his allegations in his
Answer, claimed that petitioner was his over-all coordinator in
charge of the conduct of seminars for volunteers and the
monitoring of other matters bearing on his candidacy; and that
while his campaign manager, Juanito "Johnny" Cabalu (Cabalu),
who was authorized to approve details with regard to printing
materials, presented him some campaign materials, those were
partly donated.17
When confronted with the official receipt issued to his wife
acknowledging her payment to JMG Publishing House of the
amount of P1,000,000, respondent claimed that it was his first time
to see the receipt, albeit he belatedly came to know from his wife
and Cabalu that the P1,000,000 represented "compensation [to
petitioner] who helped a lot in the campaign as a gesture of
goodwill."18
Acknowledging that petitioner is engaged in the printing business,
respondent explained that he sometimes discussed with petitioner
strategies relating to his candidacy, he (petitioner) having actively
volunteered to help in his campaign; that his wife was not
authorized to enter into a contract with petitioner regarding
campaign materials as she knew her limitations; that he no longer
questioned the P1,000,000 his wife gave petitioner as he thought
that it was just proper to compensate him for a job well done; and
that he came to know about petitioners claim against him only
after receiving a copy of the complaint, which surprised him
because he knew fully well that the campaign materials were
donations.19
Upon questioning by the trial court, respondent could not, however,
confirm if it was his understanding that the campaign materials
delivered by petitioner were donations from third parties.20
Finally, respondent, disclaiming knowledge of the Comelec rule
that if a campaign material is donated, it must be so stated on its
face, acknowledged that nothing of that sort was written on all the
materials made by petitioner.21
As adverted to earlier, the trial court rendered judgment in favor of
petitioner, the dispositive portion of which reads:
WHEREFORE, the plaintiff having proven its (sic) cause
of action by preponderance of evidence, the Court
hereby renders a decision in favor of the plaintiff ordering
the defendant as follows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12%
interest per annum from the filing of this complaint until
fully paid;
2. To pay the sum of P50,000.00 as attorneys fees and
the costs of suit.
SO ORDERED.22
Also as earlier adverted to, the Court of Appeals reversed the trial
courts decision and dismissed the complaint for lack of cause of
action.
In reversing the trial courts decision, the Court of Appeals held
that other than petitioners testimony, there was no evidence to
support his claim that Lilian was authorized by respondent to
borrow money on his behalf. It noted that the acknowledgment
receipt23 signed by Lilian did not specify in what capacity she
received the money. Thus, applying Article 131724 of the Civil
Code, it held that petitioners claim for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing House
P640,310, Metro Angeles Printing P837,696, and St. Joseph
Printing Press P446,900, the appellate court, noting that since
the owners of the last two printing presses were not impleaded as
parties to the case and it was not shown that petitioner was
authorized to prosecute the same in their behalf, held that
petitioner could not collect the amounts due them.
Finally, the appellate court, noting that respondents wife had
paid P1,000,000 to petitioner, the latters claim ofP640,310 (after
excluding the P253,000) had already been settled.
Hence, the present petition, faulting the appellate court to have
erred:
1. . . . when it dismissed the complaint on the ground that
there is no evidence, other than petitioners own
testimony, to prove that Lilian R. Soriano was authorized
by the respondent to receive the cash advance from the
petitioner in the amount of P253,000.00.
xxxx
2. . . . when it dismissed the complaint, with respect to
the amounts due to the Metro Angeles Press and St.
Joseph Printing Press on the ground that the complaint
was not brought by the real party in interest.
x x x x25
By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of
another, with the consent or authority of the latter.26 Contracts
entered into in the name of another person by one who has been
given no authority or legal representation or who has acted beyond
his powers are classified as unauthorized contracts and are
declared unenforceable, unless they are ratified.27
Generally, the agency may be oral, unless the law requires a
specific form.28 However, a special power of attorney is necessary
for an agent to, as in this case, borrow money, unless it be urgent
and indispensable for the preservation of the things which are
under administration.29 Since nothing in this case involves the
preservation of things under administration, a determination of
whether Soriano had the special authority to borrow money on
behalf of respondent is in order.
Lim Pin v. Liao Tian, et al.30 held that the requirement of a special
power of attorney refers to the nature of the authorization and not
to its form.
. . . The requirements are met if there is a clear mandate
from the principal specifically authorizing the
performance of the act. As early as 1906, this Court
in Strong v. Gutierrez-Repide (6 Phil. 680) stated that
such a mandate may be either oral or written. The one
thing vital being that it shall be express. And more
recently, We stated that, if the special authority is not
written, then it must be duly established by evidence:
"the Rules require, for attorneys to compromise the
litigation of their clients, a special authority. And while the
same does not state that the special authority be in
writing the Court has every reason to expect that, if not in
writing, the same be duly established by evidence other
than the self-serving assertion of counsel himself that
 such authority was verbally given him."31 (Emphasis and
underscoring supplied)
Petitioner submits that his following testimony suffices to establish
that respondent had authorized Lilian to obtain a loan from him,
viz:
Q : Another caption appearing on Exhibit "A" is cash
advance, it states given on 3-31-95 received by Mrs.
Lilian Soriano in behalf of Mrs. Annie Mercado, amount
P253,000.00, will you kindly tell the Court and explain
what does that caption means?
A : It is the amount representing the money borrowed
from me by the defendant when one morning they
came very early and talked to me and told me that they
were not able to go to the bank to get money for the
allowances of Poll Watchers who were having a seminar
at the headquarters plus other election related expenses
during that day, sir.
Q : Considering that this is a substantial amount which
according to you was taken by Lilian Soriano, did you
happen to make her acknowledge the amount at that
time?
32
A : Yes, sir. (Emphasis supplied)
Petitioners testimony failed to categorically state, however,
whether the loan was made on behalf of respondent or of his wife.
While petitioner claims that Lilian was authorized by respondent,
the statement of account marked as Exhibit "A" states that the
amount was received by Lilian "in behalf of Mrs. Annie Mercado."
Invoking Article 187333 of the Civil Code, petitioner submits that
respondent informed him that he had authorized Lilian to obtain
the loan, hence, following Macke v. Camps34 which holds that one
who clothes another with apparent authority as his agent, and
holds him out to the public as such, respondent cannot be
permitted to deny the authority.
Petitioners submission does not persuade. As the appellate court
observed:
. . . Exhibit "B" [the receipt issued by petitioner]
presented by plaintiff-appellee to support his claim
unfortunately only indicates the Two Hundred Fifty Three
Thousand Pesos (P253,0000.00) was received by one
Lilian R. Soriano on 31 March 1995, but without
specifying for what reason the said amount was delivered
and in what capacity did Lilian R. Soriano received [sic]
the money. The note reads:
"3-31-95
261,120 ADVANCE MONEY FOR TRAINEE
RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF
253,000 TWO HUNDRED FIFTY THREE
THOUSAND PESOS
(SIGNED)
LILIAN R. SORIANO
3-31-95"
Nowhere in the note can it be inferred that defendant-
appellant was connected with the said transaction. Under
Article 1317 of the New Civil Code, a person cannot be
bound by contracts he did not authorize to be entered
into his behalf.35 (Underscoring supplied)
It bears noting that Lilian signed in the receipt in her name alone,
without indicating therein that she was acting for and in behalf of
respondent. She thus bound herself in her personal capacity and
not as an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it
must upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was in fact authorized to make the
mortgage, if he has not acted in the name of the principal. x x
x36 (Emphasis and underscoring supplied)
On the amount due him and the other two printing presses,
petitioner explains that he was the one who personally and directly
contracted with respondent and he merely sub-contracted the two
printing establishments in order to deliver on time the campaign
materials ordered by respondent.
Respondent counters that the claim of sub-contracting is a change
in petitioners theory of the case which is not allowed on appeal.
In Oco v. Limbaring,37 this Court ruled:
The parties to a contract are the real parties in interest in
an action upon it, as consistently held by the Court. Only
the contracting parties are bound by the stipulations in
the contract; they are the ones who would benefit from
and could violate it. Thus, one who is not a party to a
contract, and for whose benefit it was not expressly
made, cannot maintain an action on it. One cannot do so,
even if the contract performed by the contracting parties
would incidentally inure to one's benefit.38 (Underscoring
supplied)
In light thereof, petitioner is the real party in interest in this case.
The trial courts findings on the matter were affirmed by the
appellate court.39 It erred, however, in not declaring petitioner as a
real party in interest insofar as recovery of the cost of campaign
materials made by petitioners mother and sister are concerned,
upon the wrong notion that they should have been, but were not,
impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total cost of
printing his campaign materials delivered by petitioner in the total
of P1,924,906, less the partial payment of P1,000,000,
or P924,906.
WHEREFORE, the petition is GRANTED. The Decision dated
December 8, 2004 and the Resolution dated April 14, 2005 of the
Court of Appeals are hereby REVERSED and SET ASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles
City, Branch 57, is REINSTATED mutatis mutandis, in light of the
foregoing discussions. The trial courts decision is modified in that
the amount payable by respondent to petitioner is reduced
to P924,906.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 166558 March 28, 2007
NORA BUENO PASION, Petitioner,
vs.
SIMPLICIO R. MELEGRITO, represented by ANSELMA
TIMONES, Respondent.
DECISION
TINGA, J.:
On 4 February 1999, respondent Simplicio R. Melegrito
(respondent), represented by Anselma Timones, filed a
complaint1lawphil.net for forcible entry against Filipina M. Bueno,
Divina M. Bueno, and Regina M. Bueno (Bueno sisters) with the
5th Municipal Circuit Trial
Court (MCTC), Gerona, Tarlac. The case was docketed as Civil
Case No. 1243-99. As plaintiff, respondent claimed that the Bueno
sisters constructed a two-story concrete residential structure on his
land located in Nilasin, Pura, Tarlac through stealth and strategy
and without his knowledge and consent. He further claimed that
despite notice and demand, the Bueno sisters still retained
possession of the land and refused to remove the structure.
On 22 July 1999, the MCTC rendered its judgment,2 the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendants,
Filipina Bueno & Divina Bueno or their agents or any person or
persons, [sic] occupying said building in question in their names or
by virtue of any authority by them:
(1) To vacate the premises occupied by said
house/improvements thereon or to remove said building
or improvements constructed thereon and restore the
said possession to [respondent];
(2) To pay [respondent] attorneys fees in the amount
of P10,000.00 plus P500.00 appearance fee per hearing;
(3) To pay the sum of P2,000.00 as damages
representing the monthly rental of the land from February
1999 until possession is fully restored to [respondent];
and
(4) To pay the costs of suit.
SO ORDERED.3
Acting on the appeal4 interposed by the Bueno sisters, on 13
December 1999, the Regional Trial Court (RTC), Branch 63,
Tarlac, Tarlac set aside the 22 July 1999 judgment of the MCTC
and ordered the case dismissed.5The RTC denied respondents
motion for reconsideration.
Respondent thereafter filed a petition for review before the Fourth
Division of the Court of Appeals.6 On 16 June 2000, the appellate
court reversed and set aside the decision of the RTC and
reinstated in toto the MCTCs judgment.7
On remand of the case, the MCTC granted respondents motion
for execution and that led to the issuance of a writ of execution on
28 June 2001. On 24 January 2002, the MCTC granted
respondents motion for the issuance of a writ of demolition for
failure of the Bueno sisters to comply with the 22 July 1999
judgment.
Subsequently, on 12 September 2002, an alias writ of
demolition8 was issued directing the sheriff or his deputies to
demolish the improvements erected by the Bueno sisters on the
subject land belonging to respondent.
On 4 November 2002, petitioner Nora Bueno Pasion (petitioner),
the recognized agricultural tenant on a portion of respondents land
and sister of the Bueno sisters, filed with the RTC, Branch 65,
Tarlac, a Complaint9 for Injunction with Writ of Preliminary
Injunction and Temporary Restraining Order and Damages against
respondent, Judge Luisito T. Adaoag,10 and the Provincial Sheriff of
Tarlac, seeking to restrain the enforcement of the writ of demolition
issued in Civil Case No. 1243-99. Petitioner claimed that the
judgment in Civil Case No. 1243-99 was being implemented
against her although she was not a party to the case. She further
claimed that she was a bonafide agricultural tenant of respondent
and that she, as such tenant, owned and actually occupied the
house sought to be demolished which was a reconstructed old
family house on the lot. She offered as proof of such ownership the
building permit11 for the houses construction and a tax declaration
covering the house.12
On 7 November 2002, the RTC, Branch 65, granted a temporary
restraining order for a period of seventy-two (72) hours,13 which
was extended for another seventeen (17) days, completing the
maximum twenty (20) day lifetime.14 On 10 December 2002, the
RTC denied the prayer for preliminary injunction.15
On 8 January 2003, petitioner filed a Petition16 for Certiorari under
Rule 65 with the Court of Appeals imputing grave abuse of
discretion to the Presiding Judge of RTC, Branch 65 in allowing a
writ of demolition to be enforced against her although she was not
a party to Civil Case No. 1243-99 and in finding that she was not
the owner of the house sought to be demolished.
On 5 May 2004, the Fifth Division of the Court of Appeals
promulgated a Decision17 in CA-G.R. SP No. 74784 denying the
petition for lack of merit. The appellate court ruled:
In denying petitioners petition for the issuance of a preliminary
injunction to enjoin the implementation of the writ of demolition
issued by the 5th MTC of Gerona-Ramos-Pura, public respondent
Judge had as its basis the findings of [the] MTC, which was later
affirmed by the 4th Division of this court. Their findings indicate
that the house which is now the subject of a writ of demolition, was
erected by the sisters of the petitioner and not by petitioner herself.
On this score alone, public respondent Judge denied petitioners
application for injunction. The rule is well-entrenched that the
issuance of the writ of preliminary injunction as an ancillary or
preventive remedy to secure the right of party in a pending case
rests upon the sound discretion of the trial court.18 Rule 58, Section
7 of the Rules of Court gives generous latitude to the trial court in
this regard for the reason that conflicting claim[s] in an application
for a provisional writ more often that not involve a factual
determination which is not the function of the appellate courts.
Hence, the exercise of sound judicial discretion by the trial court in
injunctive matters must not be interfered with except when there is
manifest abuse.
Also, it is worthy to note that in this case, petitioners grounds in
support of the petition calls for an evaluation of the evidence
presented which is not within the province of certiorari. Even if this
court were to delve on the grounds raised by the petitioner, the
findings of this Court would preempt the trial courts findings
wherein the main action for injunction is still pending.
Moreover, the assailed Order of the public respondent Judge is
only a denial of petitioners application for a preliminary injunction,
which is distinct from the main action for injunction filed with the
trial court. Thus, in the case of Tambaoan v. Court of Appeals,19 the
Supreme Court held: the inquiry in the proceedings for the
issuance or denial of a writ of preliminary injunction is premised
solely on initial evidence, and the findings thereon by the trial court
should be considered to be merely provisional until after the trial
on the merits of the case would have been concluded.20
Petitioner moved for reconsideration21 of the 5 May 2004 Decision,
but the Court of Appeals denied the motion in its 15 December
2004 Resolution.22
Hence, petitioner filed this Petition for Review under Rule 45 of the
Rules of Court.
The issue raised by petitioner may be formulated as follows:
whether the denial of petitioners prayer for a writ of preliminary
injunction to enjoin the enforcement of a writ of demolition issued
in another case to which she was not a party is tenable.
Questioning the enforcement of the writ of demolition against her,
petitioner claims ownership of the structure sought to be
demolished on the strength of a building permit and a tax
declaration as well as harps on the fact that she was not a party to
Civil Case No. 1243-99. Being a non-party in said case, she
asserts, the judgment therein may not be implemented to prejudice
her rights as the alleged owner and possessor of the subject
structure.
The petition is without merit.
An ejectment suit is an action in personam wherein judgment is
binding only upon parties properly impleaded and given an
opportunity to be heard.23 However, the rule admits of the
exception that even a non-party is bound by the judgment in an
ejectment suit where he is any of the following: (a) trespasser,
squatter or agent of the defendant fraudulently occupying the
property to frustrate the judgment; (b) guest or occupant of the
premises with the permission of the defendant; (c) transferee
pendente lite; (d) sublessee; (e) co-lessee; or (f) member of the
family, relative or privy of the defendant.24
In the case at bar, it is not disputed that petitioner falls under
situation (f) above because she is a relative of the Bueno sisters,
the defendants in Civil Case No. 1243-99.25 She herself admitted
this fact in her complaint in Civil Case No. 9420 when she referred
to the Bueno sisters as her legitimate sisters.
Besides, petitioner cannot deny her knowledge of the pendency of
Civil Case No. 1243-99. Even the judgment in the said case
acknowledges the fact that she went to the hearings with
Geronimo Zafra, the representative of her sisters.
Indeed, if she truly had an interest in the structure sought to be
demolished as she claims, she could have so informed respondent
even before the filing of the case to enable the latter to take the
necessary and appropriate action. Had respondent known that
petitioner was claiming ownership over the structure, he could
have, for example, allowed her to merely continue with its
possession or he could have impleaded her in Civil Case No.
1243-99 as a necessary party, defined in Sec. 8, Rule 3 of the
Rules of Court as "one who is not indispensable but who ought to
be joined as a party if complete relief is to be accorded as to those
already parties, or for a complete determination or settlement of
the claim subject of the action." However, respondent apparently
had been unaware of petitioners ownership claim over the
structure as she divulged the same only when she filed the
complaint in Civil Case No. 9420.
Even if petitioner was prevented by the 1991 Revised Rules on
Summary Procedure from intervening in Civil Case No. 1243-99, a
motion for intervention being a prohibited pleading therein, she
was not precluded from filing a separate case to assert and claim
her ownership over the structure. Curiously, it was only on 4
November 2002, a month after the issuance of the alias writ of
demolition in Civil Case No. 1243-99, that petitioner filed the
complaint for injunction to restrain the implementation of the writ.
At that time, Civil Case No. 1243-99, which originated in the
MCTC, had already been appealed to the RTC whose decision
was eventually reviewed
and reversed by the Court of Appeals. Through all these court
proceedings spanning a number of years, petitioner did not do or
say anything. She claims having filed a motion to quash the writ of
demolition but even this came too late in the day and was definitely
not enough to negate her apparent lackadaisical attitude in
protecting her alleged right.
Verily, the principle of equitable estoppel would now operate to
prevent petitioner from asserting her alleged ownership over the
structure and defeating the alias writ of execution issued in
execution of the decision in Civil Case No. 1243-99. Sec. 2(a),
Rule 131 of the Rules of Court states:
Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular
thing true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act or omission, be permitted to
falsify it.
Thus, we have held:
The principles of equitable estoppel, sometimes called estoppel in
pais, are made part of our law by Art. 1432 of the Civil Code.
Coming under this class is estoppel by silence, which obtains here
and as to which it has been held that:
x x x an estoppel may arise from silence as well as from
words. Estoppel by silence arises where a person, who by
force of circumstances is under a duty to another to speak,
refrains from doing so and thereby leads the other to believe
in the existence of a state of facts in reliance on which he acts
to his prejudice. Silence may support an estoppel whether the
failure to speak is intentional or negligent.
Inaction or silence may under some circumstances amount to a
misrepresentation and concealment of facts, so as to raise an
equitable estoppel. When the silence is of such a character and
under such circumstances that it would become a fraud on
the other party to permit the party who has kept silent to deny
what his silence has induced the other to believe and act on,
it will operate as an estoppel. This doctrine rests on the
principle that if one maintains silence, when in conscience he
ought to speak, equity will debar him from speaking when in
conscience he ought to remain silent. He who remains silent
when he ought to speak cannot be heard to speak when he
should be silent.
xxxx
x x x Litigation must end and terminate sometime and somewhere,
and it is essential to an effective administration of justice that once
a judgment has become final, the winning party be not, through a
mere subterfuge, deprived of the fruits of the verdict. Courts must
therefore guard against any scheme calculated to bring about that
result. Constituted as they are to put an end to controversies,
courts should frown upon any attempt to prolong them.26[Emphasis
supplied.]
The rule on estoppel in pais is a well-settled rule of equity which
has been adopted by the courts of law that where for instance A
has, by his acts or representations, or by his silence when he
ought to speak out, intentionally or through culpable negligence,
induced B to believe certain facts to exist, and B has rightfully
acted on his belief, so that he will be prejudiced if A is permitted to
deny the existence of such facts, A is conclusively estopped to
interpose a denial thereof.27
In the case at bar, petitioner had, by her silence, induced
respondent to believe that she did not have any interest on
respondents property other than being his tenant. Thus,
respondent rightfully acted on this belief and filed the forcible entry
case only against petitioners sisters whom he thought were the
owners of the structure constructed on his land. Verily, to permit
petitioner to deny the fact that she does not own the structure
would work to prejudice the rights of respondent as the winning
litigant in Civil Case No. 1243-99. Indeed, petitioner is conclusively
estopped from interposing her claim of ownership against the writ
of demolition issued to execute the decision in said
case.lawphil.net
Furthermore, what is sought to be enjoined is a judgment that has
long become final and executory. Under Sec. 1, Rule 39 of the
Rules of Court, execution shall issue as a matter of right, on
motion, upon a judgment or order that disposes of the action or
proceeding upon the expiration of the period to appeal therefrom if
no appeal has been duly perfected. As in the case at bar,
respondent, as the prevailing party in Civil Case No. 1243-99, is
entitled to a writ of execution, and the issuance thereof is a
ministerial duty of the court compellable bymandamus.28
A writ of preliminary injunction may only be issued upon a clear
showing: (1) that there exists a right to be protected, and (2) that
the action sought to be enjoined is violative of that right.29
In the case at bar, the RTC found that, in accordance with the
MCTCs findings in Civil Case No. 1243-99 as affirmed by the
Court of Appeals, the Bueno sisters, and not petitioner, were the
owners of the structure sought to be demolished. Clearly, the trial
court found that petitioner had no actual right that needs to be
protected by a writ of preliminary injunction. Verily, we find no
reason to disturb this finding of the trial court. It is well to
remember that the general rule is that the grant or denial of an
injunction rests on the sound discretion of the lower court in the
exercise of which this Court will not intervene except in a clear
case of abuse.30
WHEREFORE, premises considered, the 5 May 2004 Decision
and the 15 December 2004 Resolution of the Court of Appeals in
CA-G.R. SP No. 74784 are hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 171129 April 6, 2011
ENRICO SANTOS, Petitioner,
vs.
NATIONAL STATISTICS OFFICE, Respondent.
DECISION
DEL CASTILLO, J.:
The lessee in this case resists ejectment by the lessor on the
ground that the leased property has already been foreclosed and
is now owned by a third person.
This Petition for Review on Certiorari assails the Decision1 dated
September 6, 2005 of the Court of Appeals (CA) in CA-G.R. SP
No. 89464 which recalled and set aside the Decision2 dated April
1, 2005 of the Regional Trial Court (RTC) of Malolos City, Bulacan,
Branch 15 in Civil Case No. 651-M-04. Likewise assailed is the
CAs Resolution3 dated January 3, 2006 denying the Motion for
Reconsideration thereto.
Factual Antecedents
On February 10, 2004, petitioner Enrico Santos filed a
Complaint4 for Unlawful Detainer in the Municipal Trial Court
(MTC) of Sta. Maria, Bulacan. He claimed therein that he is the
registered owner of the property located at No. 49, National Road,
Barrio Bagbaguin, Sta. Maria, Bulacan. On January 2, 1998, he
entered into a Contract of Lease5 with respondent National
Statistics Office for the lease of 945 square meters (sq m) of the
first floor of the structure on said property for a monthly rental
of P74,000.00. Subsequently, the parties agreed to renew the
lease for a period of one year from January 1, 2003 to December
31, 2003, covering a bigger area of the same floor for an increased
monthly rental of P103,635.00.6 As the area leased by respondent
was not sufficient for its use, petitioner and respondent again
entered into another Contract of Lease7 dated September 11, 2003
which covered an additional space for a monthly rental
of P45,000.00. For failing to pay despite demand the rentals for the
months of December 2003 and January 2004 in the total amount
of P297,270.00, and for its refusal to vacate the property even
after the termination of the lease contracts on December 31, 2003,
petitioner sent respondent a formal demand8 for the latter to pay its
unpaid monthly rentals and to vacate the property. Notwithstanding
receipt, respondent still refused to pay and to vacate the property.
Hence, the complaint.
In its Answer,9 respondent through the Office of the Solicitor
General (OSG) alleged that petitioner and his wife obtained a
loan10 from China Banking Corporation (China Bank) in the amount
of P20 million, the payment of which was secured by a Real Estate
Mortgage11 constituted over the subject property covered by
Transfer Certificate of Title (TCT) No. T-95719(M). It claimed that
when petitioner entered into a contract of lease with it in 1998, he
did not inform respondent of the existence of said loan. When
petitioner failed to pay his obligation with China Bank, the property
was eventually sold in an extrajudicial foreclosure sale where said
bank emerged as the highest bidder. Since petitioner likewise
failed to redeem the property within the redemption period, title to
the same was consolidated in favor of China Bank and TCT No. T-
370128(M) was issued in its name on August 21, 2000. Despite
this and again without informing respondent, petitioner
misrepresented himself as still the absolute owner of the subject
property and entered into the second and third contracts of lease
with respondent in February and September 2003. According to
respondent, it was only in November 2003 that it knew of the
foreclosure of the subject property when it received a letter 12 from
China Bank informing it that as early as August 2000, title to the
property had already been effectively consolidated in the name of
the bank. Hence, China Bank advised respondent that as the new
and absolute owner of the subject property, it is entitled to the
rental payments for the use and occupancy of the leased premises
from the date of consolidation. Petitioner having ceased to be the
owner of said property, respondent believed that the second and
third contracts of lease it entered with him had ceased to be in
effect. Hence, petitioner has no legal right to demand that
respondent pay him said rentals and vacate the leased premises.
Conversely, respondent has no legal obligation to pay to petitioner
the rentals for the use and occupancy of the subject property.
Moreover, petitioner failed to exhaust administrative remedies as
there was no indication that he filed a money claim before the
Commission on Audit (COA) as required by Act No. 308313 as
amended by Presidential Decree (P.D.) No. 1445.14 Lastly,
respondent alleged that petitioner is without any legal personality
to institute the complaint because he is neither the owner, co-
owner, legal representative or assignee of China Bank, landlord or
a person entitled to the physical possession of the subject
property. By way of counterclaim, respondent asserted that
petitioner is obligated under the law and the equitable principle of
unjust enrichment to return to respondent all rental payments
received, with legal interests, from August 2000 to November 2003
in the total amount of P4,113,785.00.
Ruling of the Municipal Trial Court
The MTC rendered its Decision15 on September 6, 2004. It held
that while it can provisionally resolve the issue of ownership as
raised by respondent, it did not do so because of the latters
admission that it originally leased the subject property from
petitioner. According to said court, when respondent admitted that
it was a lessee of the premises owned by petitioner, it took away
its right to question petitioners title and ownership thereof. The
MTC then reiterated the well settled rule that a tenant cannot, in an
action involving the possession of leased premises, controvert the
title of his landlord. As the evidence showed that respondent was
no longer paying rents in violation of its obligation under the
second and third contracts of lease, and since said contracts
already expired and no new contract was entered into by the
parties, the MTC declared respondent a deforciant lessee which
should be ejected from the property. The dispositive portion of the
MTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff and against the defendant, ordering the
latter to:
1. Vacate the premises known as No. 49 National Road,
Bagbaguin, Santa Maria, Bulacan and peacefully
surrender possession thereof to the plaintiff;
2. Pay the plaintiff rental arrearages amounting to Two
Hundred Ninety Seven Thousand Two Hundred Seventy
Pesos (P297,270.00) for the period up to January 2004;
3. Pay the plaintiff the monthly amount of Seventy Four
Thousand Pesos (P74,000.00) from February 2004 up to
the time that it finally vacates the subject premises;
4. Pay the plaintiff the amount of Thirty Thousand Pesos
(P30,000.00) as and by way of attorneys fees, and
5. Cost of the suit.
SO ORDERED.16
Hence, respondent appealed to the RTC.
Ruling of the Regional Trial Court
Respondent faulted the MTC in not resolving the issue of
ownership in order to determine who has the better right of
possession. It emphasized that it is not an ordinary entity which
may be compelled to pay under private contracts. As an agency of
the government tasked in generating general purpose statistics, it
is bound by government auditing rules to make payments only for
validly executed contracts with persons lawfully entitled thereto.
Thus, it is necessary to ascertain the ownership of the subject
property in order to determine the person lawfully entitled to the
rental payments. And as it is clear in this case that title to the
property had already been consolidated in the name of China
Bank, respondent properly paid the rentals to said bank.
Respondent argued that as between petitioner, who had ceased to
have legal title to the property, and itself, which continuously pays
rentals to China Bank, it is the one which has the better right of
possession. In addition, respondent insisted that petitioner should
return the amount of P4,113,785.00 wrongfully paid to him, with
legal interest, until fully paid.
On the other hand, petitioner countered that even if respondent is
a government agency, it cannot be permitted to deny his title over
the property, he being the lessor of the same. To support this, he
cited Section 2(b), Rule 131 of the Rules of Court17 and Article
1436 of the Civil Code.18 Petitioner thus prayed that the RTC affirm
in toto the assailed MTC Decision.
In its Decision19 dated April 1, 2005, the RTC agreed with the
MTCs declaration that respondent is a deforciant lessee which
should be ejected from the leased premises. This was in view of
the settled rule that the fact of lease and the expiration of its terms
are the only elements in an action for ejectment, which it found to
have been established in this case. According to said court, a
plaintiff need not prove his ownership and defendant cannot deny
it. If defendant denies plaintiffs ownership, he raises a question
which is unessential to the action. The RTC further held that if
there was an issue of ownership, it is a matter between China
Bank and petitioner to settle in an appropriate proceeding. Hence,
the RTC found the appeal to be without merit, viz:
WHEREFORE, premises [considered], the assailed Decision of the
Municipal Trial Court of Sta. Maria, Bulacan, is hereby AFFIRMED.
SO ORDERED.20
Petitioner promptly moved for the issuance of a writ of
execution.21 This was, however, denied by the RTC22 in view of the
Temporary Restraining Order (TRO) issued by the CA through its
May 5, 2005 Resolution23 in CA-G.R. SP No. 89464 - the Petition
for Review brought by respondent before said court.
Ruling of the Court of Appeals
Before the CA, respondent asserted that the RTC and MTC cannot
turn a blind eye on the transfer of ownership of the subject
property to China Bank. As petitioner fraudulently executed the last
two lease contracts with respondent, he having entered into the
same despite knowledge that ownership of the subject property
had already passed on to China Bank, the rule that the lessee
cannot deny the title of his landlord does not apply. This is because
petitioner was no longer the owner of the leased premises at the
time of the execution of the last two contracts. Respondent also
believed that said contracts are void because to hold otherwise
would be to condone the anomalous situation of a party paying
rentals to one who is no longer the owner and who no longer has
the right of possession over the leased property. It likewise insisted
that it is entitled to recover the rentals paid to petitioner from the
time ownership of the subject property was transferred to China
Bank under the principle ofsolutio indebiti. Lastly, respondent
emphasized that petitioner failed to first file a money claim before
the COA.
Petitioner, for his part, basically reiterated the arguments he raised
before the RTC. In addition, he pointed out that the defense of
ownership is being invoked by respondent on behalf of another
party, China Bank. What respondent therefore would want the
lower courts to do was to rule that the subject property is owned by
another person even if said person is not a party to the ejectment
case. To petitioner, this cannot be done by the lower courts, hence,
there was no error on their part when they decided not to touch
upon the issue of ownership.
It is noteworthy that before the petition was resolved, the CA first
issued a Resolution24 dated July 15, 2005 granting respondents
prayer for a Writ of Preliminary Injunction which enjoined the
enforcement of the RTCs April 1, 2005 Decision. Thereafter, the
CA proceeded to decide the case and thus issued a
Decision25 dated September 6, 2005.
In its Decision, the CA recognized the settled rule that a tenant, in
an action involving the possession of the leased premises, can
neither controvert the title of his landlord nor assert any rights
adverse to that title, or set up any inconsistent right to change the
relation existing between himself and his landlord. However, it
declared that said doctrine is subject to qualification as enunciated
in Borre v. Court of Appeals26 wherein it was held that "[t]he rule
on estoppel against tenants x x x does not apply if the landlords
title has expired, or has been conveyed to another, or has been
defeated by a title paramount, subsequent to the commencement
of lessor-lessee relationship." In view of this, the CA concluded
that the RTC erred when it relied mainly on the abovementioned
doctrine enunciated under Sec. 2(b), Rule 131 of the Rules of
Court and skirted away from resolving the issue of ownership. The
CA noted that respondent was able to prove that title to the subject
property has already been effectively consolidated in the name of
China Bank. Hence, it found petitioner to be in bad faith and to
have acted with malice in still representing himself to be the owner
of the property when he entered into the second and third
contracts of lease with respondent. Under these circumstances,
the CA declared that respondent was justified in refusing to pay
petitioner the rents and thus, the ejectment complaint against
respondent states no cause of action.
In addition, the CA opined that there was no landlord-tenant
relationship created between the parties because the agreements
between them are void. The element of consent is wanting
considering that petitioner, not being the owner of the subject
property, has no legal capacity to give consent to said contracts.
The CA, however, denied respondents prayer for the return of the
rentals it paid to petitioner by ratiocinating that to grant the same
would be to effectively rule on the ownership issue rather than
merely resolving it for the purpose of deciding the issue on
possession.
The CA disposed of the case in this wise:
IN VIEW OF ALL THE FOREGOING, the instant petition for review
is GRANTED, the assailed decision isRECALLED and SET
ASIDE, and a new one entered DISMISSING Civil Case No. 651-
M-04 (MTC Civil Case No. 1708). No pronouncement as to costs.
SO ORDERED.27
Both parties moved for reconsideration28 of the above Decision but
were, however, unsuccessful as the CA denied their motions in a
Resolution29 dated January 3, 2006.
Undeterred, petitioner now comes to us through this Petition for
Review on Certiorari.
Issues
Petitioner raises the following issues:
I. Whether x x x the Honorable Court of Appeals erred in
overturning the respective decisions of the RTC-Malolos
City, Bulacan and MTC-Sta. Maria, Bulacan which both
held that a lessor has the better right of possession over
a realty.
II. Whether x x x the Honorable Court of Appeals - in
resolving the issue of who between the lessor and the
lessee has better possession of the premises known as
No. 49, National Road, Bagbaguin, Sta. Maria, Bulacan
erred in delving on the issue of ownership in resolving
the issues raised in C.A.-G.R. SP No. 89464.
III. Whether x x x the Honorable Court of Appeals erred in
not awarding damages to the Petitioner, the lessor of the
premises known as No. 49, National Road, Bagbaguin,
Sta. Maria, Bulacan.30
The Parties Arguments
Petitioner contends that the ruling in Borre does not apply to this
case because here, there is nothing to show that his title to the
subject property had expired, or had been conveyed to another, or
had been defeated by a title paramount. In fact, petitioner informs
this Court that the dispute between him and China Bank
concerning the ownership of the subject property is still pending
litigation before Branch 17 of RTC-Malolos, Bulacan. Hence,
petitioner asserts that there are yet no factual and legal bases for
the CA to rule that he lost his title over the property. Besides,
petitioner believes that ownership is not an issue in actions for
ejectment especially when the parties thereto are the landlord and
tenant. Moreover, petitioner contends that based on Fige v. Court
of Appeals,31 respondent as lessee cannot be allowed to interpose
a defense against him as lessor without the former first delivering
to him the leased premises. Petitioner also claims that he is
entitled to payment of damages in the form of fair rental value or
reasonable compensation for the use and occupation of the
property. In sum, petitioner wants this Court to reverse and set
aside the assailed CA Decision and Resolution and to reinstate the
respective Decisions of the MTC and RTC.
Respondent, for its part, negates petitioners claim that he has not
yet lost his title to the property by emphasizing that such title has
already been effectively consolidated in the name of China Bank.
And, considering that government auditing rules preclude
respondent from paying rentals to a party not entitled thereto, it
was proper for it to pay the same to the new owner, China Bank.
Moreover, respondent imputes bad faith upon petitioner for not
informing it of the change in ownership of the property and for still
collecting rental payments despite such change. Thus, respondent
prays that the petition be denied for lack of merit.
Our Ruling
We find no merit in the petition.
The conclusive presumption found in Sec. 2(b), Rule 131 of the
Rules of Court known as estoppel against tenants provides as
follows:
Sec. 2. Conclusive presumptions. The following are instances of
conclusive presumptions:
xxxx
(b) The tenant is not permitted to deny the title of his landlord at
the time of the commencement of the relation of landlord and
tenant between them. (Emphasis supplied).
It is clear from the above-quoted provision that "[w]hat a tenant is
estopped from denying x x x is the title of his landlord at the time of
the commencement of the landlord-tenant relation. If the title
asserted is one that is alleged to have been acquired subsequent
to the commencement of that relation, the presumption will not
apply."32Hence, "the tenant may show that the landlords title has
expired or been conveyed to another or himself; and he is not
estopped to deny a claim for rent, if he has been ousted or evicted
by title paramount."33
Thus, we declared in Borre v. Court of Appeals34 that:
The rule on estoppel against tenants is subject to a qualification. It
does not apply if the landlords title has expired, or has been
conveyed to another, or has been defeated by a title paramount,
subsequent to the commencement of lessor-lessee relationship
[VII Francisco, The Revised Rules of Court in the Philippines 87
(1973)]. In other words, if there was a change in the nature of the
title of the landlord during the subsistence of the lease, then the
presumption does not apply. Otherwise, if the nature of the
landlords title remains as it was during the commencement of the
relation of landlord and tenant, then estoppel lies against the
tenant. (Emphasis supplied.)
While petitioner appears to have already lost ownership of the
property at the time of the commencement of the tenant-landlord
relationship between him and respondent, the change in the nature
of petitioners title, as far as respondent is concerned, came only
after the commencement of such relationship or during the
subsistence of the lease. This is precisely because at the time of
the execution of the second and third contracts of lease,
respondent was still not aware of the transfer of ownership of the
leased property to China Bank. It was only in November 2003 or
less than two months before the expiration of said contracts when
respondent came to know of the same after it was notified by said
bank. This could have been the reason why respondent did not
anymore pay petitioner the rents for the succeeding months of
December 2003 and January 2004. Thus, it can be said that there
was a change in the nature of petitioners title during the
subsistence of the lease that the rule on estoppel against tenants
does not apply in this case. Petitioners reliance on said conclusive
presumption must, therefore, necessarily fail since there was no
error on the part of the CA when it entertained respondents
assertion of a title adverse to petitioner.
We also find untenable petitioners argument that respondent
cannot assert ownership of the property by a third person
considering that China Bank, as such third person, is not a party to
the ejectment case. As earlier said, a tenant in proper cases such
as this, may show that the landlords title has been conveyed to
another. In order to do this, the tenant must essentially assert that
title to the leased premises already belongs to a third person who
need not be a party to the ejectment case. This is precisely what
respondent was trying to do when it endeavored to establish that
the property is now owned by China Bank.
From the above discussion, it is not difficult to see that the
question of possession is so intertwined with the question of
ownership to the effect that the question of possession cannot be
resolved without resolving the question of ownership. This is the
reason why we are upholding the CAs resolution of the issue of
ownership in this ejectment case. "It bears emphasizing that in
ejectment suits, the only issue for resolution is the physical or
material possession of the property involved, independent of any
claim of ownership by any of the party litigants."35 However, "[i]n
cases where defendant raises the question of ownership in the
pleadings and the question of possession cannot be resolved
without deciding the issue of ownership, the court may proceed
and resolve the issue of ownership but only for the purpose of
determining the issue of possession. [Nevertheless], the
disposition of the issue of ownership is not final, as it may be the
subject of separate proceeding[s] specifically brought to settle the
issue."36 Hence, the fact that there is a pending case between
petitioner and China Bank respecting the ownership of the property
does not preclude the courts to rule on the issue of ownership in
this case.1avvphi1
Paragraph 3 of the Complaint for Unlawful Detainer states that
petitioner is the registered owner of the property located at No. 49,
National Road, Barrio Bagbaguin, Sta. Maria, Bulacan.37 It is in fact
by virtue of this alleged ownership that he entered into contracts of
lease with respondent and was ejecting the latter by reason of the
expiration of said contracts. However, we note that petitioner, as
plaintiff in the Complaint for Unlawful Detainer, failed to discharge
his burden of showing that he indeed owned the property. "In civil
cases, the burden of proof is on the plaintiff to establish his case
by a preponderance of evidence. If he claims a right granted or
created by law, he must prove his claim by competent evidence.
He must rely on the strength of his own evidence and not on the
weakness of that of his opponent."38 On the other hand,
respondent has satisfactorily shown that title to the property has
already been conveyed to China Bank. It submitted the following
documents: (1) the Promissory Note39 executed by petitioner and
his spouse in favor of China Bank for a loan of P20 million and the
(Real Estate) Mortgage40 over the subject property; (2) the Petition
for Extrajudicial Foreclosure of said Real Estate Mortgage; 41 (3) the
Notice of Auction Sale By Notary Public, Certificate of Posting,
Affidavit of Publication and Certificate of Sale in favor of China
Bank,42 all in connection with the extrajudicial foreclosure sale of
the leased premises; (4) the Affidavit of Consolidation43 executed
by China Banks Vice-President to inform the Registry of Deeds of
Meycauayan, Bulacan that the one-year period of redemption has
expired without petitioner redeeming the property and to request
said office to issue the corresponding TCT under the banks name;
and (5) TCT No. T-370128 (M)44 issued on August 21, 2000 in the
name of China Bank covering the leased property. Said
documents, particularly TCT No. T-370128 (M), undeniably show
that China Bank is the owner of the property and not petitioner. "As
a matter of law, a Torrens Certificate of Title is evidence of
indefeasible title of property in favor of the person in whose name
the title appears. The title holder is entitled to all the attributes of
ownership of the property, including possession, subject only to
limits imposed by law."45 Not being the registered titleholder, we
hold that petitioner does not have a better right of possession over
the property as against respondent who is in actual possession
thereof and who claims to derive its right of possession from the
titleholder, China Bank, to whom it pays rents for its use. Hence,
petitioners action for unlawful detainer must fail. This being
settled, it is obvious that petitioner is likewise not entitled to
payment of damages for the fair rental value or reasonable
compensation for the use and occupation of the property.
WHEREFORE, the petition is DENIED. The assailed Decision
dated September 6, 2005 and Resolution dated January 3, 2006 of
the Court of Appeals in CA-G.R. SP No. 89464 are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 194560 June 11, 2014
NESTOR T. GADRINAB, Petitioner,
vs.
NORAT. SALAMANCA, ANTONIO TALAO AND ELENA
LOPEZ, Respondents.
DECISION
LEONEN, J.:
A judgment on compromise agreement is a judgment on the
merits. It has the effect of res judicata, and is immediately final and
executory unless set aside because of falsity or vices of consent.
The doctrine of immutability of judgments bars courts from
modifying decisions that have already attained finality, even if the
purpose of the modification is to correct errors of fact or law.
This Rule 45 petlt10n seeks the review of the Court of Appeals'
Decision1 dated July 22, 2010 and its resolution2dated November
19, 2010.
The Court of Appeals dismissed petitioners appeal and affirmed
the Regional Trial Courts decision granting respondent
Salamancas motion for physical partition pending the execution of
a judgment on compromise agreement between the parties.
Respondents, together with Adoracion Gadrinab and Arsenia
Talao, are siblings and heirs of the late Spouses Talao, Nicolas
and Aurelia.3 The Spouses Talao died intestate, leaving a parcel of
land in Sta. Ana, Manila.4
The five Talao children divided the property among themselves
through an extrajudicial settlement.5Subsequently, Arsenia Talao
waived her share over the property in favor of her siblings. 6
Respondent Salamanca filed a complaint for partition against her
siblings, Antonio, Elena (deceased, now represented by her
husband, Jose Lopez), and Adoracion (deceased, now
represented by heirs, petitioner Nestor and Francisco Gadrinab)
before the Regional Trial Court of Manila.7
All parties claimed their respective shares in the property.8 They
also claimed shares in the rentals collected from one of the units of
a duplex apartment on the property.9 The total amount of rental
collection in the possession of Jose Lopez was 528,623.00.10 The
amount, according to Joses counsel, was ready for distribution.11
Upon being referred to mediation, the parties entered into a
compromise agreement and stipulated the following:
1) That the subject property (land with all the
improvements) situated at 2370 Nacar Street, San
Andres, Sta. Ana, Manila will be subject for sale and the
amount will be divided among the four (plaintiff and
defendants);
2) That the subject property will be appraised by
independent appraiser and the appraised value will be
divided into four. Mr. Antonio Talao will pay in advance
the share of Francisco Gadrinab immediately after the
report of the said appraisal;
3) That Cuervo Appraiser will be the one who appraised
[sic] the property on or before March 21, 2003 and any
appraised value shall binding [sic] on all parties;
 4) That the rental collection in its total amount of Five
Hundred Twenty Eight Thousand and Six Hundred
Twenty Three Pesos (528,623.00) and the uncollected
amount up to February 2003 once collected will be
divided among the parties;
5) That the amount of 528,623.00 divided by four be
distributed among the parties will be given to all parties
on or before March 12, 2003 by Mr. Antonio Talao;
6) That upon payment of the appraised value to
Francisco Gadrinab, Mr. Nestor Gadrinab is given forty-
five (45) days within which to leave the premises in
question;
7) That the parties agreed to waive all their claims and
counter-claims arising from this case; and
8) That the parties agreed to request this Honorable
Court that a decision be issued base [sic] on this
Compromise Agreement or this Compromise Agreement
be submitted before this Honorable Court for approval.12
On April 10, 2003, the Regional Trial Court approved the
compromise agreement.13 Based on the entry of judgment, the
case became final and executory on April 10, 2003.14
Nestor Gadrinab filed a motion for execution of the compromise
agreement.15 He demanded his one-fourth share in the
accumulated rentals.16 During the hearing on the motion for
execution, the parties agreed that the rentals shall be divided only
into three since Nestor had already been occupying one of the
duplex units.17 The parties also agreed that Antonio Talao would
shoulder Nestors share, equivalent to one-fourth of the rental
amount.18
Pursuant to the compromise agreement, Cuervo Appraiser
appraised the property.19 Unsatisfied with the appraisal, Antonio
Talao moved for the propertys reappraisal.20 This was denied by
the Regional Trial Court.21
The portion of the duplex that Nestor refused to vacate, 22 remained
unsold.23
Because of the attitude of her co-heirs, respondent Salamanca
moved for the physical partition of the property before the Regional
Trial Court of Manila.24 She prayed for the physical partition of the
property instead of having it sold.25
Nestor and Francisco Gadrinab opposed the motion.26 They
contended that the judgment on the compromise agreement had
already become final and executory and had the effect of res
judicata.27 Antonio Talao and Jose Lopez did not object to the
motion for physical partition.28
On December 29, 2005, the Regional Trial Court of Manila granted
the motion for physical partition.29
Nestor and Francisco Gadrinab appealed to the Court of Appeals.
They assailed the grant of Salamancas motion for physical
partition after the issuance of the judgment on compromise
agreement.30
In a decision promulgated on July 22, 2010,31 the Court of Appeals
dismissed the appeal. The Court of Appeals ruled that the
exception to the immutability of judgments, that is, "whenever
circumstances transpire after the finality of the decision rendering
its execution unjust and inequitable,"32 applies in this case. The
Court of Appeals specifically noted that the "parties seemingly
endless disagreements on matters involving the disposition of the
subject property"33 were such circumstances that rendered the
compromise agreements execution unjust and inequitable. The
Court of Appeals agreed with the Regional Trial Courts ruling that
"the proposed physical partition of the subject lot . . . is just another
way of enforcing the [c]ourts decision and will not in anyway vary
the parties agreement nor affect their right over the property."34
On November 19, 2010, the Court of Appeals denied petitioners
motion for reconsideration.35
Hence, this petition was filed.
Petitioner argued that the Court of Appeals erred in affirming the
Regional Trial Courts order granting respondent Salamancas
motion for physical partition.36 A judgment on the compromise
agreement had already been rendered and had attained
finality.37 Petitioner also argued that the Court of Appeals failed to
consider the following terms of the compromise agreement:
2. That the subject property will be appraised by
independent appraiser and the appraised value will be
divided into four (4). Mr. Antonio Talao will pay in
advance the share of Francisco Gadrinab immediately
after the report of the said appraisal;
....
4. That the rental collection in its total amount of FIVE
HUNDRED TWENTY EIGHT THOUSAND SIX
HUNDRED TWENTY THREE PESOS (Php528,623.00)
and the uncollected amount up to February 2003 once
collected [sic] will be divided among the parties;
5. That the amount of FIVEHUNDRED TWENTY EIGHT
THOUSAND SIX HUNDRED TWENTY THREE PESOS
Php528,623.00 divided by four (4) among the parties will
be given to all parties on or [sic] March 12, 2003 by Mr.
Antonio Talao at Greenbelt, Mc Donald at 9:00 oclock in
the morning;
6. That upon payment of the appraised value to Mr.
Francisco Gadrinab, Mr. Nestor Gadrinab is given forty
five (45) days within which to leave the premises in
question[.]38 (Emphasis in the original)
Petitioner alleged that the judgment on the compromise agreement
had already been partially complied with, as respondent
Salamanca had already been paid her share in the accrued
rentals.39 On the other hand, petitioner still had not been paid his
share,40 prompting him to file the motion for execution.41
Petitioner pointed out that there was no agreement that he must
vacate the property before it could be sold.42
Moreover, petitioner argued that the Court of Appeals decision
violated his right to due process.43 According to him, had there
been a full-blown trial on the action for partition, he would have
been able to present evidence of exclusive possession of half of
the property.44
In their separate comments, respondents Salamanca and Talao
argued that this case fell under the exception of the rule on
immutability of judgments.45 The non-compliance of some of the
parties with the compromise agreement constituted an event that
"[makes] it difficult if not totally impossible to enforce the
compromise agreement."46
Respondents Salamanca and Talao also argued that the physical
partition of the property would not prejudice the parties.47 The order
granting the motion for physical partition was a mere enforcement
of the compromise agreement, which entitled the parties to their
shares in the proceeds of the sale.48 Respondent Salamanca
pointed out that the grant of the motion for physical partition would
still be consistent with the intent of the compromise agreement
since it would result in the proceeds being divided equally among
the parties.49 "The Order granting the physical partition was within
the inherent power and authority of the court having jurisdiction to
render a particular judgment to enforce it and to exercise equitable
control over such enforcement."50
Moreover, petitioners refusal to vacate the property prevented it
from being sold so that the proceeds could already be distributed
among the parties.51
On the violation of due process, respondents Salamanca and
Talao argued that it was only before this court that this issue was
raised.
The issue in this case is whether the Court of Appeals erred in
affirming the Regional Trial Courts decision allowing the physical
partition of the property despite finality of a previous judgment on
compromise agreement involving the division of the same property.
The petition is meritorious.
The Court of Appeals erred in
affirming the Regional Trial
Courts decision allowing the
physical partition of the property
Respondent Salamanca filed two actions for physical partition. The
two parties settled the first action through a judicial compromise
agreement. The same respondent filed the second action after she
had determined that her co-heirs were not being cooperative in
complying with the compromise agreement.
In a compromise agreement, the parties freely enter into
stipulations. "[A] judgment based on a compromise agreement is a
judgment on the merits"52 of the case. It has the effect of res
judicata. These principles are impressed both in our law and
jurisprudence.
Thus, Article 2037 of the Civil Code provides:
Article 2037. A compromise has upon the parties the effect and
authority of res judicata; but there shall be no execution except in
compliance with a judicial compromise.
In Spouses Romero v. Tan,53 this court said:
It is well settled that a judicial compromise has the effect of res
judicata and is immediately executory and not appealable unless
set aside [by mistake, fraud, violence, intimidation, undue
influence, or falsity of documents that vitiated the compromise
agreement].54
There is res judicata when the following concur:
1. Previous final judgment;
2. By a court having jurisdiction over the parties and the
subject matter;
3. On the merits of the case;
4. Between identical parties, on the same subject matter,
and cause of action55
There are two rules that embody the principle of res judicata. The
first rule refers to "bar by prior judgment,"56which means that
actions on the same claim or cause of action cannot be
relitigated.57 This rule is embodied in Rule 39, Section 47,
paragraph (b) of the Rules of Court, which provides:
Section 47. Effect of judgments or final orders. The effect of a
judgment or final order rendered by a court of the Philippines,
having jurisdiction to pronounce the judgment or final order, may
be as follows:
(b) In other cases, the judgment or final order is, with respect to
the matter directly adjudged or as to any other matter that could
have been raised in relation thereto, conclusive between the
parties and their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating for
the same thing and under the same title and in the same
capacity[.]
The second rule refers to "conclusiveness of judgment."58 This
means that facts already tried and determined in another action
involving a different claim or cause of action cannot anymore be
relitigated.59 This rule is embodied in Rule 39, Section 47,
paragraph (c) of the Rules of Court, which provides:
Section 47. Effect of judgments or final orders. The effect of a
judgment or final order rendered by a court of the Philippines,
having jurisdiction to pronounce the judgment or final order, may
be as follows:
....
(c) In any other litigation between the same parties or their
successors in interest, that only is deemed to have been adjudged
in a former judgment or final order which appears upon its face to
have been so adjudged, or which was actually and necessarily
included therein or necessary thereto. (49a)
This case involves "bar by prior judgment." Respondents cannot
file another action for partition after final judgment on compromise
had already been rendered in a previous action for partition
involving the same parties and property.
This court explained in FGU Insurance Corporation v. Regional
Trial Court60 the doctrine of finality of judgment:
Under the doctrine of finality of judgment or immutability of
judgment, a decision that has acquired finality becomes immutable
and unalterable, and may no longer be modified in any respect,
even if the modification is meant to correct erroneous conclusions
of fact and law, and whether it be made by the court that rendered
it or by the Highest Court of the land. Any act which violates this
principle must immediately be struck down. 61
This doctrine admits a few exceptions, usually applied to serve
substantial justice:
1. "The correction of clerical errors;
2. the so-called nunc pro tunc entries which cause no
prejudice to any party;
3. void judgments; and
4. whenever circumstances transpire after the finality of
the decision rendering its execution unjust and
inequitable."62
Doctrines on bar by prior judgment and immutability of judgment
apply whether judgment is rendered after a full-blown trial or after
the parties voluntarily execute a compromise agreement duly
approved by the court.
Because a judicial compromise agreement is in the nature of both
an agreement between the parties and a judgment on the merits, it
is covered by the Civil Code provisions on contracts. It can be
avoided on grounds that may avoid an ordinary contract, e.g., it is
not in accord with the law;63 lack of consent by a party; and
existence of fraud or duress. Further, the pertinent Civil Code
provisions on compromise agreements provide:
Article 2038. A compromise in which there is mistake, fraud,
violence, intimidation, undue influence, or falsity of documents is
subject to the provisions of Article 1330 of this Code.
Article 1330. A contract where consent is given through mistake,
violence, intimidation, undue influence, or fraud is voidable.
Therefore, courts cannot entertain actions involving the same
cause of action, parties, and subject matter without violating the
doctrines on bar by prior judgment and immutability of judgments,
unless there is evidence that the agreement was void, obtained
through fraud, mistake or any vice of consent, or would disrupt
substantial justice.
In this case, there was no issue as to the fact that the parties freely
entered into the compromise agreement. There was also no
dispute about the clarity of its terms. Some of the parties simply do
not wish to abide by the compromise agreements terms.
This court does not see how substantial justice will be served by
disturbing a previous final judgment on compromise when failure of
its execution was caused by the parties themselves.
Likewise, respondents argument that a supervening event, i.e.
disagreement among the parties, was present to justify
disturbance of the final judgment on compromise fails to persuade.
A supervening event may justify the disturbance of a final judgment
on compromise if it "brought about a material change in [the]
situation"64 between the parties. The material change
contemplated must render the execution of the final judgment
unjust and inequitable. Otherwise, a party to the compromise
agreement has a "right to have the compromise agreement
executed, according to its terms."65
The subsequent disagreement among the parties did not cause
any material change in the situation or in the relations among the
parties. The situation and relations among the parties remained
the same as the situation and their relations prior to the
compromise agreement. They remained co-owners of the property,
which they desired to partition.
Moreover, the parties voluntarily agreed to the compromise
agreement, which was already stamped with judicial approval. The
agreements execution would bring about the effects desired by all
parties and the most just and equitable situation for all. On the
other hand, the judgment granting the second action for partition
filed by respondent Salamanca was obtained with opposition.
Judges "have the ministerial and mandatory duty to implement and
enforce [a compromise agreement]."66 Absent appeal or motion to
set aside the judgment, courts cannot modify, impose terms
different from the terms of a compromise agreement, or set aside
the compromises and reciprocal concessions made in good faith
by the parties without gravely abusing their discretion.67
"[They cannot] relieve parties from [their] obligations . . . simply
because [the agreements are] . . . unwise."68Further, "[t]he mere
fact that the Compromise Agreement favors one party does not
render it invalid."69 Courts do not have power to "alter contracts in
order to save [one party]
from [the effects of] adverse stipulations. . . ."70
Respondents have remedies if
parties to the compromise
agreement refuse to abide by its
terms
The issue in this case involves the non-compliance of some of the
parties with the terms of the compromise agreement.1wphi1 The
law affords complying parties with remedies in case one of the
parties to an agreement fails to abide by its terms.
A party may file a motion for execution of judgment. Execution is a
matter of right on final judgments. Section 1, Rule 39 of the Rules
of Court provides:
Section 1. Execution upon judgments or final orders. Execution
shall issue as a matter of right, on motion, upon a judgment or
order that disposes of the action or proceeding upon the expiration
of the period to appeal therefrom if no appeal has been duly
perfected. (1a)
If the appeal has been duly perfected and finally resolved, the
execution may forthwith be applied for in the court of origin, on
motion of the judgment obligee, submitting therewith certified true
copies of the judgment or judgments or final order or orders sought
to be enforced and of the entry thereof, with notice to the adverse
party.
The appellate court may, on motion in the same case, when the
interest of justice so requires, direct the court of origin to issue the
writ of execution. (n)
If a party refuses to comply with the terms of the judgment or
resists the enforcement of a lawful writ issued, an action for
indirect contempt may be filed in accordance with Rule 71 of the
Rules of Court:
Section 3. Indirect contempt to be punished after charge and
hearing. After a charge in writing has been filed, and an
opportunity given to the respondent to comment thereon within
such period as may be fixed by the court and to be heard by
himself or counsel, a person guilty of any of the following acts may
be punished for indirect contempt;
....
(b) Disobedience of or resistance to a lawful writ, process, order, or
judgment of a court, including the act of a person who, after being
dispossessed or ejected from any real property by the judgment or
process of any court of competent jurisdiction, enters or attempts
or induces another to enter into or upon such real property, for the
purpose of executing acts of ownership or possession, or in any
manner disturbs the possession given to the person adjudged to
be entitled thereto[.]
Since a judgment on compromise agreement is effectively a
judgment on the case, proper remedies against ordinary
judgments may be used against judgments on a compromise
agreement. Provided these are availed on time and the
appropriate grounds exist, remedies may include the following: a)
motion for reconsideration; b) motion for new trial; c) appeal; d)
petition for relief from judgment; e) petition for certiorari; and f)
petition for annulment of judgment.71
Respondent Salamanca knew that the only reason for the failed
compromise agreement was the non-compliance with the
agreements terms of some of her co-heirs. Particularly, it was
stipulated that petitioners removal from the property was
conditioned upon payment of an amount equivalent to his share.
Respondent Talao refused to abide by his own undertaking to
shoulder respondent Salamancas share. He also refused to
acknowledge the appraisal of the appraiser appointed in the
compromise agreement. This refusal caused the failure of the
compromise agreement.
Instead of availing herself of the proper remedies so the
compromise could be enforced and the partition could be effected,
respondent Salamanca chose to move again for the partition of the
property and set aside a valid and final judgment on compromise.
This court cannot allow such motion to prosper without going
against law and established jurisprudence on judgments.
WHEREFORE, the Court of Appeals decision is REVERSED and
SET ASIDE. The judgment on the compromise agreement is
REINSTATED.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78315 January 2, 1989
COMMERCIAL CREDIT CORPORATION CAGAYAN DE
ORO, petitioner,
vs.
THE COURT OF APPEALS and THE CAGAYAN DE ORO
COLISEUM, INC., respondents.
GANCAYCO, J.:
In this petition for review of a decision of the Court of Appeals in
CA G.R. SP No. 10888 1 the issue is whether or not a compromise
judgment which was found by the Court of Appeals to be lawful
may be modified by the same court.
Sometime in 1978 private respondent Cagayan De Oro Coliseum,
Inc. executed a promissory note in the amount of P329,852.54 in
favor of petitioner Commercial Credit Corporation of Cagayan de
Oro, payable in 36 monthly installments. The note is secured by a
real estate mortgage duly executed by private respondent in favor
of petitioner. As said respondent defaulted in the payment of the
monthly installments due, petitioner proceeded with the
extrajudicial foreclosure of the real estate mortgage in September,
1979.
Five minority stockholders of private respondent then instituted
Special Civil Action No. 68111 in the then Court of First Instance
(CFI) of Misamis Oriental questioning the power of the private
respondent to execute the real estate mortgage without the
consent of its stockholders. In due course a compromise
agreement was entered into by the parties on the basis of which a
compromise judgment was rendered by the trial court on March 11,
1980 which reads as follows:
JUDGMENT
The parties in the above-entitled case assisted
by their respective counsel, submitted for the
approval of the Court the following Compromise
Agreement, to wit:
COMES NOW, Parties, Petitioners and
Respondents, represented by their respective
counsels, unto this Honorable Court, most
respectfully submit for approval the following
Compromise Agreement:
1. That, Petitioners herein hereby state that
they ratified and approved the loan and real
estate mortgage entered into and assigned by
the Cagayan de Oro Coliseum, Inc. to the
Commercial Credit Corporation of Cagayan de
Oro and as such therefore, the issue raised by
the herein petitioners in the above entitled case
has become moot and academic;
2. That, by virtue of the aforementioned, the
Cagayan de Oro Coliseum, Inc. thru its Board
of Directors and represented by its President,
Mr. Johnny Wilson, hereby admits its total
outstanding obligation to herein Respondent
Commercial Credit Corporation of Cagayan de
Oro in the amount of TWO HUNDRED FORTY
NINE THOUSAND TWO HUNDRED SIXTY
THREE & 23/100 PESOS (P 249,263.23), as of
February 15, 1980, including therein the sum of
P 10,000.00 representing attorney's fees for
Respondent Commercial Credit Corporation of
Cagayan de Oro;
3. That the Cagayan de Oro Coliseum, Inc. has
agreed to pay the above obligation plus interest
on diminishing balance computed yearly at
sixteen (16) percent per annum, thus:
Total Account.................... P 249,263.23
Total Interest...................... P 76,138.60
Total Payable ...................... P 325,401.83
4. That, the Cagayan de Oro Coliseum, Inc.
hereby agrees to pay the aforegoing obligation
in paragraph (3) hereof in equal monthly
installments of P11,000.00, the first installment
shall be payable in February, 1980 and every
month thereafter until the whole account
payable as aforementioned is fully paid;
5. That, failure on the part of Respondent
Cagayan de Oro Coliseum, Inc. to pay any of
the installments as they shall become due, the
whole amount then outstanding and unpaid
shall immediately become due and payable in
its entirety and shall render the judgment herein
to be immediately final, unappealable and
executory; and the overdue and unpaid
installments shall earn a three (3%) per cent
per month penalty charge until fully paid, plus
five percent (5%) of the outstanding balance as
additional attorney's fee;
6. That, Respondent Commercial Credit
Corporation of Cagayan de Oro hereby agrees
to withdraw its application with Respondent City
Sheriff of Cagayan de Oro for the extrajudicial
foreclosure of the real estate mortgage subject
of this complaint;
7. That, the Parties herein waive in favor of
each other any and all forms of damage arising
out of, connected with and/or as a result of this
action.
WHEREFORE, the Parties respectfully pray of
this Honorable Court that judgment in
accordance with the Compromise Agreement
be rendered. (Pages 25-27, Rollo)
However as private respondent failed to comply with the terms of
the judgment for failure to pay several installments in the amount
of P70,152.65 which matured on July 13, 1982, petitioner filed
an ex-parte motion for the issuance of a writ of execution on March
4, 1983. The Court granted the said motion in an order dated
March 10, 1983. A notice of auction sale was issued on March 11,
1983. Private respondent filed a motion for reconsideration of said
order alleging that it had paid its obligation. The execution of the
writ was suspended pending consideration of said motion. An
opposition thereto was filed by petitioner to which a reply was filed
by the private respondent and, in turn, the comment of the
petitioner was also submitted. On November 26, 1986, the trial
court denied said motion for reconsideration and, accordingly, a
writ of execution was issued on December 4, 1986. The Deputy
Provincial Sheriff set the auction sale for January 23, 1987.
However, said auction sale did not take place as scheduled due to
some internal problems in the office of sheriff.
Private respondent then filed a special civil action in the Court of
Appeals to annul said compromise-judgment, alleging that the trial
court acted in serious violation of law and/or in grave abuse of
discretion. In due course, a decision was rendered by said
appellate court on February 13, 1987, the dispositive part of which
reads as follows:
WHEREFORE, the present petition is DENIED
due course and is hereby DISMISSED.
Effective March 16, 1983, the overdue and
unpaid installments shall earn one half per cent
(1/2%) per month penalty charge until fully paid,
plus two per cent (2%) of the outstanding
balance as additional attorney's fees. (Page 33,
Rollo)
A motion for reconsideration of the decision was filed by petitioner.
On March 23, 1987 a resolution denying the motion was issued by
the respondent appellate court.
On the other hand, private respondent also filed a motion for
reconsideration and comment on the petitioner's motion for
reconsideration. On May 19, 1987, respondent Court issued a
resolution, the dispositive part of which reads as follows:
Acting on the said first part of the petitioner's
motion for reconsideration as well as the private
respondent's comment thereon, the aforestated
grounds for said motion having been already
taken up by this Court in reaching the said
February 13, 1987 decision, and finding no
reason to disturb the same, the said motion as
to its said first part, is DENIED for lack of merit.
As to the said second part of petitioner's motion for
reconsideration, for clarity, the dispositive portion of the February
13, 1987 decision is re-worded to read as follows:
WHEREFORE, the present petition is
GRANTED in the sense that effective March
16, 1983, the overdue and unpaid installments
shall earn one half per cent (1/2%) per month
penalty charge until fully paid, plus two per cent
(2%) of the outstanding balance as additional
attorney's fees.
And in view of such disposition.
1) THE JUDGMENT DATED MARCH 11, 1980
AND THE ORDER DATED NOVEMBER 26,
1986 OF RESPONDENT DENT COURT ARE
HEREBY DECLARED MODIFIED
CONFORMABLY WITH THE FEBRUARY 13,
1987 DECISION OF THIS COURT; and
2) THE WRIT OF EXECUTION ISSUED BY
RESPONDENT DENT CLERK OF COURT,
AND THE SHERIFF'S NOTICE OF SALE, THE
PUBLIC AUCTION SALE AND THE
CERTIFICATE OF SALE ARE DECLARED
NULL AND VOID IN SO FAR AS THEY ARE
NOT IN ACCORDANCE WITH AND IN
EXCESS OF THE NOW MODIFIED
JUDGMENT AND MODIFIED ORDER OF THE
RESPONDENT COURT DATED MARCH 11,
1980 AND NOVEMBER 26, 1986,
RESPECTIVELY
(Page 148, Rollo)
Hence, the herein petition for review on certiorari wherein
petitioner alleges the following reasons as warranting the grant of
the petition:
a) THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN
EXCESS OF JURISDICTION WHEN IT
MODIFIED THE TRIAL COURT'S
COMPROMISE JUDGMENT AFTER IT
DENIED DUE COURSE AND DISMISSED THE
PETITION FOR ANNULMENT OF
RESPONDENT COLISEUM.
b) THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE
ERROR IN APPLYING ARTICLE 1229 OF THE
CIVIL CODE IN THE CASE AT BAR.
c) THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE
ERROR WHEN IT MODIFIED THE EFFECT'S
OF THE 3% PENALTY INTEREST AND
ATTORNEY'S FEES, AFTER IT UPHELD THE
LEGALITY OF THE COMPROMISE
JUDGMENT OF THE TRIAL COURT." (Page
14, Rollo)
The petition is impressed with merit. It is axiomatic that a
compromise judgment is final and immediately executory. Once a
judgment becomes final and executory, the prevailing party can
have it executed as a matter of right and the execution becomes a
ministerial duty on the part of the court . 2 A judicial compromise
has the force and effect of res judicata. 3
Such a final and executory judgment cannot be modified or
amended. If an amendment is to be made, it may consist only of
supplying an omission, striking out a superfluity or interpreting an
ambiguous phrase therein in relation to the body of the decision
which gives it life . 4 A compromise judgment should not be
disturbed except for vices in consent or forgery. 5
In the present case, the compromise agreement was voluntarily
entered into by the parties assisted by their respective counsel and
was duly approved by the trial court. Indeed, it was confirmed by
the respondent appellate court to be lawful. There was, therefore,
no cogent basis for the respondent appellate court to modify said
compromise agreement by reducing the penalty and attorney's
fees provided for therein.
In spite of the protestation of private respondent that the penalty
and interests provided in the compromise agreement was violative
of the Usury Law, the respondent appellate court, applying the
provisions of Central Bank Circular No. 721, found no violation
thereof as in fact the imposition of the penalty is sanctioned by
Article 1226 of the Civil Code. The respondent court cited the De
Venecia vs. Del Rosario 6 where this Court held that in the
absence of a stipulation to the contrary, recovery of both the
penalty and the interest until full payment of the debt is allowed
under existing laws.
The modification of said compromise judgment by the respondent
appellate court is predicated on the provision of Article 1229 of the
Civil Code which provides as follows:
ART. 1229. The Judge shall equitably reduce
the penalty when the principal obligation has
been partly or irregularly complied with by the
debtor. Even if there has been no performance,
the penalty may also be reduced by the courts
if it is iniquitous or unconscionable.
The foregoing provision of the law applies only to obligations or
contract, subject of a litigation, the condition being that the same
has been partly or irregularly complied with by the debtor. The
provision also applies even if there has been no performance, as
long as the penalty is iniquituous or unconscionable. It cannot
apply to a final and executory judgment.
When the parties entered into the said compromise agreement and
submitted the same for the approval of the trial court, its terms and
conditions must be the primordial consideration why the parties
voluntarily entered into the same. The trial court approved it
because it is lawful, and is not against public policy or morals.
Even the respondent Court of Appeals upheld the validity of the
said compromise agreement. Hence, the respondent court has no
authority to reduce the penalty and attorney's fees therein
stipulated which is the law between the parties and is res judicata.
WHEREFORE, the petition is GRANTED. The decision of the
respondent Court of Appeals dated February 13, 1987 and its
resolutions dated March 23, 1987 and May 19, 1987 are hereby
SET ASIDE and another judgment is hereby rendered affirming in
toto the compromise judgment of the trial court dated March 11,
1980, with costs against private respondent. This decision is
immediately executory.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
10,000.00 on September 30, 1990;
FIRST DIVISION
G.R. No. 104133 April 18, 1995
SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA,
petitioners,
vs.
THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO
and FLORENTINA RAMIRO, respondents.
QUIASON, J.:
This is a petition for review on ceitiorari under Rule 45 of the
Revised Rules of Court of the Decision dated December 27,
1991 and the Resolution dated February 11, 1992 of the Court
of Appeals in CA-G.R. SP No. 24683.
I
On October 10, 1987, petitioners executed a Deed of Sale with
Right to Repurchase in favor of private respondents,
involving a residential house located at No. 346 Algeciras St.,
Sampaloc, Manila. Due to serious financial and business
reverses, petitioners were not able to redeem the property
within four months as agreed upon.
On October 24, 1989, private respondents filed a complaint for
ejectment in the Metropolitan Trial Court of the City of Manila,
docketed as Civil Case No. 130352-CV against petitioners.
On December 27, 1989, the parties, assisted by their counsels,
executed a compromise agreement. In an order dated March
15, 1990, the Metropolitan Trial Court approved the
compromise agreement. The order reproduced the agreement
as follows:
1. That defendants [petitioners herein] agree
to pay plaintiffs [private respondents herein]
in the amounts and on the dates specifically
indicated herein below:
2. That failure on the part of the defendants
to pay three (3) consecutive payments,
plaintiffs will be entitled to a writ of
execution, unless the parties agree to
extend the period of entitlement to a writ of
execution in writing to be submitted and/or
approved by this Honorable Court; . . .
(Rollo, p. 53).
On April 15, 1990, private respondents filed a motion for
execution on the ground that petitioners failed to pay the first
three installments stipulated in the compromise agreement, to
wit: P50,000.00 on January 31, 1990; P10,000.00 on February
28, 1990; and P10,000.00 on March 31, 1990.
On April 6, 1990, petitioners filed an "Urgent Ex-Parte Motion
for Reconsideration and/or Correct Order of this Court"
calling attention to a typographical error in the Order dated
March 15, 1990, and asking that the amount of P10.000.00
payable on September 30, 1990 be corrected and changed to
the agreed amount of P50,000.
On April 25, 1990, the Metropolitan Trial Court issued an order
granting the motion for correction of the typographical error
in the decision.
On August 17, 1990, petitioners filed a motion asking that the
check payments previously deposited by them with the court,
be accepted and be given to respondents in compliance with
their compromise agreement.
On August 23, 1990, respondents opposed petitioners' ex-
parte motion and stated that they would not renew the
compromise agreement with petitioners.
The Metropolitan Trial Court denied private respondents'
motion for execution dated April 15, 1990 and another similar
motion dated June 26, 1990.
On October 12, 1990, respondents filed a petition
for mandamus with us (G.R. No. 95470). In a resolution dated
November 5, 1990, we referred the case to the Executive
Judge of the Regional Trial Court, Manila. petitioners moved
to dismiss the petition for mandamus.
On March 14, 1991 the Regional Trial Court denied the motion
to dismiss and issued the assailed resolution commanding
the Metropolitan Trial Court to issue a writ of execution of the
decision approving the compromise agreement in Civil Case
No. 130352-CV.
In compliance with the said resolution, the Metropolitan Trial
Court issued an order dated March 27, 1991 directing the
issuance of a writ of execution to enforce the compromise
agreement entered into by the parties.
On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the
Premises" was served on petitioner.
Petitioners then filed a petition for certiorari with a prayer for
the issuance of a temporary restraining order and a writ of
injunction with the Court of Appeals (CA-G.R. SP No. 24683).
On December 27, 1991, the Court of Appeals dismissed the
petition. Likewise, the said court denied the motion for
reconsideration filed by petitioner.
II
Petitioners contend that both the Regional Trial Court and
Metropolitan Trial Court acted with grave abuse of discretion,
the former in issuing a resolution directing the Metropolitan
Trial Court to issue a writ of execution against petitioners
herein, and the latter, in issuing said writ of execution.
III
A compromise agreement is a contract between the parties,
which if not contrary to law, morals or public policy, is valid
and enforceable between them (Municipal Board of
Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435
[1975]). There are two kinds of compromise agreements, the
judicial, which puts an end to a pending litigation, and the
extrajudicial, which is to avoid a litigation (Civil Code of the
Philippines, Art. 2028; Caguioa, VI Commentaries and Cases,
on Civil Law 292 [1970]).
As a contract, a compromise agreement is perfected by
mutual consent (Rovero v. Amparo, 91 Phil. 228 [1952]). A
judicial compromise, however, while binding between the
parties upon its execution, is not executory until it is
approved by the court and reduced to a judgment.
Article 2037 of the Civil Code of the Philippines provides:
A compromise has upon the parties the
effect and authority of res judicata; but
there shall be no execution except in
compliance with a judicial compromise.
The non-fulfillment of the terms and conditions of a
compromise agreement approved by the court justifies
execution thereof and the issuance of the writ for said
purpose is the court's ministerial duty enforceable
by mandamus (Maceda, Jr. v. Moreman Builders Co., Inc., 203
SCRA 293 [1991]).
In the compromise agreement, petitioners obligated
themselves to pay private respondents the amount of
P50,000.00 on January 31, 1990, P10,000.00 on February 28,
1990, and P10,000.00 on March 31, 1990.
Petitioners received a copy of the decision of the Metropolitan
Trial Court approving the compromise agreement on March
26, 1990. Clearly, there was a breach, for it was only on
August 17, 1990 that petitioners attempted to pay by means of
nine postdated checks the amounts agreed upon. In effect,
the first installment payment of P50,000.00 due on January 31,
1990 was moved to August 31, 1990, the second installment of
P10,000.00 due on February 28, 1990 was moved to
September 30, 1990 and so forth, thereby making the last
installment of P5,000.00 due on September 30, 1990 moved to
April 30, 1991. This is tantamount to novating the original
agreement entered into by the parties without the consent of
private respondents.
Inasmuch as a judicial compromise becomes binding between
the parties upon its execution, petitioners should have paid
the installments falling due even before the approval thereof
by the trial court. But assuming that a judicial compromise is
not perfected until it is approved by the court, still petitioner
should have paid the compromise agreement installments
due on March 31, 1990, together with the installments due on
January 31 and February 28, 1990 on or before March 31,
1990.
Petitioners also assail the validity of the issuance by the
Deputy Sheriff of the notice to voluntarily vacate the premises
by way of enforcing the decision approving the compromise
agreement. They maintain that their obligation is monetary in
nature and the applicable rule should have been Section 15,
Rule 39 and not Section 13, Rule 39 of the Revised Rules of
Court.
Petitioners contention has merit.
When the parties entered into a compromise agreement, the
original action for ejectment was set aside and the action was
changed to a monetary obligation.
A perusal of the compromise agreement signed by the parties
and approved by the inferior court merely provided that in
case the defendants (petitioners herein) failed to pay three
monthly installments, the plaintiffs (private respondents
herein) would be entitled to a writ of execution, without
specifying what the subject of execution would be. Said
agreement did not state that petitioners would be evicted from
the premises subject of the suit in case of any default in
complying with their obligation thereunder. This was the
result of the careless drafting thereof for which only private
respondents were to be blamed.
A judgment is the foundation of a writ of execution which
draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio
St. 325). An officer issuing a writ of execution is required to
look to the judgment for his immediate authority (Sydnor v.
Roberts, 12 Tex. 598).
An execution must conform to and be warranted by the
judgment on which it was issued (Francisco, The Revised
Rules of Court 641 [1966]; Kramer v. Montgomery, 206
Okla.190, 242 p. 2d 414 [1952]). There should not be a
substantial variance between the judgment and the writ of
execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is
fatally defective if the judgment was for a sum of money and
the writ of execution was for the sale of mortgaged property
(Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]).
As petitioners' obligation under the compromise agreement
as approved by the court was monetary in nature, private
respondents can avail only of the writ of execution provided
in Section 15, Rule 39 of the Revised Rules of Court, and not
that provided in Section 13.
Section 15, Rule 39 provides:
Execution of money judgments. The
officer must enforce an execution of a
money judgment by levying on all the
property, real and personal of every name
and nature whatsoever, and which may be
disposed of for value, of the judgment
debtor not exempt from execution, or on a
sufficient amount of such property, if there
be sufficient, and selling the same, and
paying to the judgment creditor, or his
attorney, so much of the proceeds as will
satisfy the judgment. Any excess in the
proceeds over the judgment and accruing
costs must be delivered to the judgment
debtor, unless otherwise directed by the
judgment or order of the court. When there
is more property of the judgment debtor
than is sufficient to satisfy the judgment
and accruing costs, within the view of the
officer, he must levy only on such part of
the property as is amply sufficient to satisfy
the judgment and costs.
Real property, stocks, shares, debts,
credits, and other personal property, or any
interest in either real or personal property,
may be levied on in like manner and with
like effect as under a writ of attachment.
On the other hand, Section 13, Rule 39
provides:
 How execution for the delivery or restitution
of property enforced. The officer must
enforce an execution for the delivery or
restitution of property by ousting therefrom
the person against whom the judgment is
rendered and placing the judgment creditor
in possession of such property, and by
levying as hereinafter provided upon so
much of the property of the judgment debtor
as will satisfy the amount of the judgment
and costs included in the writ of execution.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the MODIFICATION that the Sheriff is directed
to enforce the execution only of the money judgment in
accordance with Section 15, Rule 39 of the Revised Rules of
Court.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179597 February 3, 2014
IGLESIA FILIPINA INDEPENDIENTE, Petitioner,
vs.
HEIRS of BERNARDINO TAEZA, Respondents.
DECISION
PERALTA, J.:
This deals with the Petition for Review on Certiorari under Rule 45
of the Rules of Court praying that the Decision1of the Court of
Appeals (CA), promulgated on June 30, 2006, and the
Resolution2 dated August 23, 2007, denying petitioner's motion for
reconsideration thereof, be reversed and set aside.
The CA's narration of facts is accurate, to wit:
The plaintiff-appellee Iglesia Filipina Independiente (IFI, for
brevity), a duly registered religious corporation, was the owner of a
parcel of land described as Lot 3653, containing an area of 31,038
square meters, situated at Ruyu (now Leonarda), Tuguegarao,
Cagayan, and covered by Original Certificate of Title No. P-8698.
The said lot is subdivided as follows: Lot Nos. 3653-A, 3653-B,
3653-C, and 3653-D.
Between 1973 and 1974, the plaintiff-appellee, through its then
Supreme Bishop Rev. Macario Ga, sold Lot 3653-D, with an area
of 15,000 square meters, to one Bienvenido de Guzman.
On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total
area of 10,000 square meters, were likewise sold by Rev. Macario
Ga, in his capacity as the Supreme Bishop of the plaintiff-appellee,
to the defendant Bernardino Taeza, for the amount
of P100,000.00, through installment, with mortgage to secure the
payment of the balance. Subsequently, the defendant allegedly
completed the payments.
In 1977, a complaint for the annulment of the February 5, 1976
Deed of Sale with Mortgage was filed by the Parish Council of
Tuguegarao, Cagayan, represented by Froilan Calagui and Dante
Santos, the President and the Secretary, respectively, of the
Laymen's Committee, with the then Court of First Instance of
Tuguegarao, Cagayan, against their Supreme Bishop Macario Ga
and the defendant Bernardino Taeza.
The said complaint was, however, subsequently dismissed on the
ground that the plaintiffs therein lacked the personality to file the
case.
After the expiration of Rev. Macario Ga's term of office as Supreme
Bishop of the IFI on May 8, 1981, Bishop Abdias dela Cruz was
elected as the Supreme Bishop. Thereafter, an action for the
declaration of nullity of the elections was filed by Rev. Ga, with the
Securities and Exchange Commission (SEC).
In 1987, while the case with the SEC is (sic) still pending, the
plaintiff-appellee IFI, represented by Supreme Bishop Rev.
Soliman F. Ganno, filed a complaint for annulment of the sale of
the subject parcels of land against Rev. Ga and the defendant
Bernardino Taeza, which was docketed as Civil Case No. 3747.
The case was filed with the Regional Trial Court of Tuguegarao,
Cagayan, Branch III, which in its order dated December 10, 1987,
dismissed the said case without prejudice, for the reason that the
issue as to whom of the Supreme Bishops could sue for the church
had not yet been resolved by the SEC.
On February 11, 1988, the Securities and Exchange Commission
issued an order resolving the leadership issue of the IFI against
Rev. Macario Ga.
Meanwhile, the defendant Bernardino Taeza registered the subject
parcels of land. Consequently, Transfer Certificate of Title Nos. T-
77995 and T-77994 were issued in his name.
The defendant then occupied a portion of the land. The plaintiff-
appellee allegedly demanded the defendant to vacate the said
land which he failed to do.
In January 1990, a complaint for annulment of sale was again filed
by the plaintiff-appellee IFI, this time through Supreme Bishop
Most Rev. Tito Pasco, against the defendant-appellant, with the
Regional Trial Court of Tuguegarao City, Branch 3.
On November 6, 2001, the court a quo rendered judgment in favor
of the plaintiff-appellee.1wphi1 It held that the deed of sale
executed by and between Rev. Ga and the defendant-appellant is
null and void.3
The dispositive portion of the Decision of Regional Trial Court of
Tuguegarao City (RTC) reads as follows:
WHEREFORE, judgment is hereby rendered:
1) declaring plaintiff to be entitled to the claim in the
Complaint;
2) declaring the Deed of Sale with Mortgage dated
February 5, 1976 null and void;
3) declaring Transfer Certificates of Title Numbers T-
77995 and T-77994 to be null and void ab initio;
4) declaring the possession of defendant on that portion
of land under question and ownership thereof as
unlawful;
5) ordering the defendant and his heirs and successors-
in-interest to vacate the premises in question and
surrender the same to plaintiff; [and]
6) condemning defendant and his heirs pay (sic) plaintiff
the amount of P100,000.00 as actual/consequential
damages and P20,000.00 as lawful attorney's fees and
costs of the amount (sic).4
Petitioner appealed the foregoing Decision to the CA. On June 30,
2006, the CA rendered its Decision reversing and setting aside the
RTC Decision, thereby dismissing the complaint.5 The CA ruled
that petitioner, being a corporation sole, validly transferred
ownership over the land in question through its Supreme Bishop,
who was at the time the administrator of all properties and the
official representative of the church. It further held that "[t]he
authority of the then Supreme Bishop Rev. Ga to enter into a
contract and represent the plaintiff-appellee cannot be assailed, as
there are no provisions in its constitution and canons giving the
said authority to any other person or entity."6
Petitioner then elevated the matter to this Court via a petition for
review on certiorari, wherein the following issues are presented for
resolution:
A.) WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NOT FINDING THE FEBRUARY 5, 1976
DEED OF SALE WITH MORTGAGE AS NULL AND
VOID;
B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT
IT IS NOT VOID, WHETHER OR NOT THE COURT OF
APPEALS ERRED IN NOT FINDING THE FEBRUARY
5, 1976 DEED OF SALE WITH MORTGAGE AS
UNENFORCEABLE, [and]
C.) WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NOT FINDING RESPONDENT TAEZA
HEREIN AS BUYER IN BAD FAITH.7
The first two issues boil down to the question of whether then
Supreme Bishop Rev. Ga is authorized to enter into a contract of
sale in behalf of petitioner.
Petitioner maintains that there was no consent to the contract of
sale as Supreme Bishop Rev. Ga had no authority to give such
consent. It emphasized that Article IV (a) of their Canons provides
that "All real properties of the Church located or situated in such
parish can be disposed of only with the approval and conformity of
the laymen's committee, the parish priest, the Diocesan Bishop,
with sanction of the Supreme Council, and finally with the approval
of the Supreme Bishop, as administrator of all the temporalities of
the Church." It is alleged that the sale of the property in question
was done without the required approval and conformity of the
entities mentioned in the Canons; hence, petitioner argues that the
sale was null and void.
In the alternative, petitioner contends that if the contract is not
declared null and void, it should nevertheless be found
unenforceable, as the approval and conformity of the other entities
in their church was not obtained, as required by their Canons.
Section 113 of the Corporation Code of the Philippines provides
that:
Sec. 113. Acquisition and alienation of property. - Any corporation
sole may purchase and hold real estate and personal property for
its church, charitable, benevolent or educational purposes, and
may receive bequests or gifts for such purposes. Such corporation
may mortgage or sell real property held by it upon obtaining an
order for that purpose from the Court of First Instance of the
province where the property is situated; x x x Provided, That in
cases where the rules, regulations and discipline of the religious
denomination, sect or church, religious society or order concerned
represented by such corporation sole regulate the method of
acquiring, holding, selling and mortgaging real estate and personal
property, such rules, regulations and discipline shall control, and
the intervention of the courts shall not be necessary.8
Pursuant to the foregoing, petitioner provided in Article IV (a) of its
Constitution and Canons of the Philippine Independent
Church,9 that "[a]ll real properties of the Church located or situated
in such parish can be disposed of only with the approval and
conformity of the laymen's
committee, the parish priest, the Diocesan Bishop, with sanction of
the Supreme Council, and finally with the approval of the Supreme
Bishop, as administrator of all the temporalities of the Church."
Evidently, under petitioner's Canons, any sale of real property
requires not just the consent of the Supreme Bishop but also the
concurrence of the laymen's committee, the parish priest, and the
Diocesan Bishop, as sanctioned by the Supreme Council.
However, petitioner's Canons do not specify in what form the
conformity of the other church entities should be made known.
Thus, as petitioner's witness stated, in practice, such consent or
approval may be assumed as a matter of fact, unless some
opposition is expressed.10
Here, the trial court found that the laymen's committee indeed
made its objection to the sale known to the Supreme Bishop. 11 The
CA, on the other hand, glossed over the fact of such opposition
from the laymen's committee, opining that the consent of the
Supreme Bishop to the sale was sufficient, especially since the
parish priest and the Diocesan Bishop voiced no objection to the
sale.12
The Court finds it erroneous for the CA to ignore the fact that the
laymen's committee objected to the sale of the lot in question. The
Canons require that ALL the church entities listed in Article IV (a)
thereof should give its approval to the transaction. Thus, when the
Supreme Bishop executed the contract of sale of petitioner's lot
despite the opposition made by the laymen's committee, he acted
beyond his powers.
This case clearly falls under the category of unenforceable
contracts mentioned in Article 1403, paragraph (1) of the Civil
Code, which provides, thus:
Art. 1403. The following contracts are unenforceable, unless they
are ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers;
In Mercado v. Allied Banking Corporation,13 the Court explained
that:
x x x Unenforceable contracts are those which cannot be enforced
by a proper action in court, unless they are ratified, because either
they are entered into without or in excess of authority or they do
not comply with the statute of frauds or both of the contracting
parties do not possess the required legal capacity. x x x.14
Closely analogous cases of unenforceable contracts are those
where a person signs a deed of extrajudicial partition in behalf of
co-heirs without the latter's authority;15 where a mother as judicial
guardian of her minor children, executes a deed of extrajudicial
partition wherein she favors one child by giving him more than his
share of the estate to the prejudice of her other children; 16 and
where a person, holding a special power of attorney, sells a
property of his principal that is not included in said special power of
attorney.17
In the present case, however, respondents' predecessor-in-
interest, Bernardino Taeza, had already obtained a transfer
certificate of title in his name over the property in question. Since
the person supposedly transferring ownership was not authorized
to do so, the property had evidently been acquired by mistake. In
Vda. de Esconde v. Court of Appeals,18 the Court affirmed the trial
court's ruling that the applicable provision of law in such cases is
Article 1456 of the Civil Code which states that "[i]f property is
acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit
of the person from whom the property comes." Thus, in Aznar
Brothers Realty Company v. Aying,19 citing Vda. de Esconde,20 the
Court clarified the concept of trust involved in said provision, to wit:
Construing this provision of the Civil Code, in Philippine National
Bank v. Court of Appeals, the Court stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense for in a typical trust, confidence is reposed in one
person who is named a trustee for the benefit of another who is
called the cestui que trust, respecting property which is held by the
trustee for the benefit of the cestui que trust. A constructive trust,
unlike an express trust, does not emanate from, or generate a
fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary.
The concept of constructive trusts was further elucidated in the
same case, as follows:
. . . implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or
which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the
parties. In turn, implied trusts are either resulting or constructive
trusts. These two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or
interest and are presumed always to have been contemplated by
the parties. They arise from the nature of circumstances of the
consideration involved in a transaction whereby one person
thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in
order to satisfy the demands of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good
conscience, to hold. (Italics supplied)
A constructive trust having been constituted by law between
respondents as trustees and petitioner as beneficiary of the
subject property, may respondents acquire ownership over the
said property? The Court held in the same case of Aznar,21 that
unlike in express trusts and resulting implied trusts where a trustee
cannot acquire by prescription any property entrusted to him
unless he repudiates the trust, in constructive implied trusts, the
trustee may acquire the property through prescription even if he
does not repudiate the relationship. It is then incumbent upon the
beneficiary to bring an action for reconveyance before prescription
bars the same.
22
In Aznar, the Court explained the basis for the prescriptive period,
to wit:
x x x under the present Civil Code, we find that just as an implied
or constructive trust is an offspring of the law (Art. 1456, Civil
Code), so is the corresponding obligation to reconvey the property
and the title thereto in favor of the true owner. In this context, and
vis--vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten
years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx xxx xxx
An action for reconveyance based on an implied or constructive
trust must perforce prescribe in ten years and not otherwise. A long
line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an
action for reconveyance based on an implied or constructive trust
prescribes in ten years from the issuance of the Torrens title over
the property.
It has also been ruled that the ten-year prescriptive period begins
to run from the date of registration of the deed or the date of the
issuance of the certificate of title over the property, x x x. 23
Here, the present action was filed on January 19, 1990,24 while the
transfer certificates of title over the subject lots were issued to
respondents' predecessor-in-interest, Bernardino Taeza, only on
February 7, 1990.25
Clearly, therefore, petitioner's complaint was filed well within the
prescriptive period stated above, and it is only just that the subject
property be returned to its rightful owner.
WHEREFORE, the petition is GRANTED. The Decision of the
Court of Appeals, dated June 30, 2006, and its Resolution dated
August 23, 2007, are REVERSED and SET ASIDE. A new
judgment is hereby entered:
(1) DECLARING petitioner Iglesia Filipina Independiente
as the RIGHTFUL OWNER of the lots covered by
Transfer Certificates of Title Nos. T-77994 and T-77995;
(2) ORDERING respondents to execute a deed
reconveying the aforementioned lots to petitioner;
(3) ORDERING respondents and successors-in-interest
to vacate the subject premises and surrender the same
to petitioner; and
(4) Respondents to PAY costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 194366 October 10, 2012
NAPOLEON D. NERI, ALICIA D. NERI-MONDEJAR, VISMINDA
D. NERI-CHAMBERS, ROSA D. NERI-MILLAN, DOUGLAS D.
NERI, EUTROPIA D. ILLUT-COCKINOS AND VICTORIA D.
ILLUT-PIALA, Petitioners,
vs.
HEIRS OF HADJI YUSOP UY AND JULPHA* IBRAHIM
UY, Respondents.
DECISION
PERLAS-BERNABE, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the Rules
of Court, petitioners Napoleon D. Neri (Napoleon), Alicia D. Neri-
Mondejar (Alicia), Visminda D. Neri-Chambers (Visminda), Rosa
D. Neri-Millan (Rosa), Douglas D. Neri (Douglas), Eutropia D. Illut-
Cockinos (Eutropia), and Victoria D. Illut-Piala (Victoria) seek to
reverse and set aside the April 27, 2010 Decision2 and October 18,
2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No.
01031-MIN which annulled the October 25, 2004 Decision4 of the
Regional Trial Court (RTC) of Panabo City, Davao del Norte and
instead, entered a new one dismissing petitioners complaint for
annulment of sale, damages and attorneys feesagainst herein
respondents heirs of spouses Hadji Yusop Uy and Julpha Ibrahim
Uy (heirs of Uy).
The Facts
During her lifetime, Anunciacion Neri (Anunciacion) had seven
children, two (2) from her first marriage with Gonzalo Illut
(Gonzalo), namely: Eutropia and Victoria, and five (5) from her
second marriage with Enrique Neri (Enrique), namely: Napoleon,
Alicia, Visminda, Douglas and Rosa. Throughout the marriage of
spouses Enrique and Anunciacion, they acquired several
homestead properties with a total area of 296,555 square meters
located in Samal, Davao del Norte, embraced by Original
Certificate of Title (OCT) Nos. (P-7998) P-21285, (P-14608) P-
51536 and P-20551 (P-8348)7issued on February 15, 1957, August
27, 1962 and July 7, 1967, respectively.
On September 21, 1977, Anunciacion died intestate. Her husband,
Enrique, in his personal capacity and as natural guardian of his
minor children Rosa and Douglas, together with Napoleon, Alicia,
and Vismindaexecuted an Extra-Judicial Settlement of the Estate
with Absolute Deed of Sale8 on July 7, 1979, adjudicating among
themselves the said homestead properties, and thereafter,
conveying themto the late spouses Hadji Yusop Uy and Julpha
Ibrahim Uy (spouses Uy)for a consideration of P 80,000.00.
On June 11, 1996, the children of Enrique filed a complaint for
annulment of saleof the said homestead properties against
spouses Uy (later substituted by their heirs)before the RTC,
docketed as Civil Case No.96-28, assailing the validity of the sale
for having been sold within the prohibited period. Thecomplaint
was later amended to include Eutropia and Victoriaas additional
plaintiffs for having been excluded and deprived of their legitimes
as childrenof Anunciacion from her first marriage.
In their amended answer with counterclaim, the heirs of Uy
countered that the sale took place beyond the 5-year prohibitory
period from the issuance of the homestead patents. They also
denied knowledge of Eutropia and Victorias exclusionfrom the
extrajudicial settlement and sale of the subject properties, and
interposed further the defenses of prescription and laches.
The RTC Ruling
On October 25, 2004, the RTC rendered a decision ordering,
among others, the annulment of the Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale. It ruled that while the sale
occurred beyond the 5-year prohibitory period, the sale is still void
because Eutropia and Victoria were deprived of their hereditary
rights and that Enrique had no judicial authority to sell the shares
of his minor children, Rosa and Douglas.
Consequently, it rejected the defenses of laches and prescription
raised by spouses Uy, who claimed possession of the subject
properties for 17 years, holding that co-ownership rights are
imprescriptible.
The CA Ruling
On appeal, the CAreversed and set aside the ruling of the RTC in
its April 27, 2010 Decision and dismissed the complaint of the
petitioners. It held that, while Eutropia and Victoria had no
knowledge of the extrajudicial settlement and sale of the subject
properties and as such, were not bound by it, the CA found it
unconscionable to permit the annulment of the sale considering
spouses Uys possession thereof for 17 years, and thatEutropia
and Victoriabelatedlyfiled their actionin 1997, ormore than two
years fromknowledge of their exclusion as heirs in 1994 when their
stepfather died. It, however, did not preclude the excluded heirs
from recovering their legitimes from their co-heirs.
Similarly, the CA declared the extrajudicial settlement and the
subsequent saleas valid and binding with respect to Enrique and
hischildren, holding that as co-owners, they have the right to
dispose of their respective shares as they consider necessary or
fit.While recognizing Rosa and Douglas to be minors at that time,
they were deemed to have ratified the sale whenthey failed to
question it upon reaching the age of majority.Italso found laches to
have set in because of their inaction for a long period of time.
The Issues
In this petition, petitioners imputeto the CA the following errors:
I. WHEN IT UPHELDTHE VALIDITY OF THE "EXTRA JUDICIAL
SETTLEMENT OF THE ESTATE WITH ABSOLUTE DEED OF
SALE" AS FAR AS THE SHARES OF EUTROPIA AND VICTORIA
WERE CONCERNED, THEREBY DEPRIVING THEM OF THEIR
INHERITANCE;
II. WHEN IT DID NOT NULLIFY OR ANNUL THE "EXTRA
JUDICIAL SETTLEMENT OF THE ESTATE WITH ABSOLUTE
DEED OF SALE" WITH RESPECT TO THE SHARESOF ROSA
AND DOUGLAS, THEREBY DEPRIVING THEM OF THEIR
INHERITANCE; and
III. WHEN IT FOUND THAT LACHES OR PRESCRIPTION HAS
SET IN.
The Ruling of the Court
The petitionis meritorious.
It bears to stress that all the petitioners herein are indisputably
legitimate children of Anunciacion from her first and second
marriages with Gonzalo and Enrique, respectively, and
consequently, are entitled to inherit from her in equal shares,
pursuant to Articles 979 and 980 of the Civil Code which read:
ART. 979. Legitimate children and their descendants succeed the
parents and other ascendants, without distinction as to sex or age,
and even if they should come from different marriages.
xxx
ART. 980. The children of the deceased shall always inherit from
him in their own right, dividing the inheritance in equal shares.
As such, upon the death of Anunciacion on September 21, 1977,
her children and Enrique acquired their respective
inheritances,9 entitling them to their pro indiviso shares in her
whole estate, as follows:
Enrique 9/16 (1/2 of the conjugal assets + 1/16)
Eutropia 1/16
Victoria 1/16
Napoleon 1/16
Alicia 1/16
Visminda 1/16
Rosa 1/16
Douglas 1/16
Hence, in the execution of the Extra-Judicial Settlement of the
Estate with Absolute Deed of Sale in favor of spouses Uy, all the
heirs of Anunciacionshould have participated. Considering that
Eutropia and Victoria were admittedly excluded and that then
minors Rosa and Douglas were not properly represented therein,
the settlement was not valid and binding uponthem and
consequently, a total nullity.
Section 1, Rule 74 of the Rules of Court provides:
SECTION 1. Extrajudicial settlement by agreement between
heirs. x x x
The fact of the extrajudicial settlement or administration shall be
published in a newspaper of general circulation in the manner
provided in the next succeeding section; but no extrajudicial
settlement shall be binding upon any person who has not
participated therein or had no notice thereof. (Underscoring added)
The effect of excluding the heirs in the settlement of estate was
further elucidated in Segura v. Segura,10 thus:
It is clear that Section 1 of Rule 74 does not apply to the partition
in question which was null and void as far as the plaintiffs were
concerned. The rule covers only valid partitions. The partition in
the present case was invalid because it excluded six of the nine
heirs who were entitled to equal shares in the partitioned property.
Under the rule "no extrajudicial settlement shall be binding upon
any person who has not participated therein or had no notice
thereof." As the partition was a total nullity and did not affect the
excluded heirs, it was not correct for the trial court to hold that their
right to challenge the partition had prescribed after two years from
its execution
However, while the settlement of the estate is null and void, the
subsequent sale of the subject propertiesmade by Enrique and his
children, Napoleon, Alicia and Visminda, in favor of the
respondents isvalid but only with respect to their proportionate
shares therein.It cannot be denied that these heirs have acquired
their respective shares in the properties of Anunciacion from the
moment of her death11and that, as owners thereof, they can very
well sell their undivided share in the estate.12
With respect to Rosa and Douglas who were minors at the time of
the execution of the settlement and sale, their natural guardian and
father, Enrique, represented them in the transaction. However, on
the basis of the laws prevailing at that time, Enrique was merely
clothed with powers of administration and bereft of any authority to
dispose of their 2/16 shares in the estate of their mother,
Anunciacion.
Articles 320 and 326 of the Civil Code, the laws in force at the time
of the execution of the settlement and sale, provide:
ART. 320. The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under parental
authority. If the property is worth more than two thousand pesos,
the father or mother shall give a bond subject to the approval of
the Court of First Instance.
ART. 326. When the property of the child is worth more than two
thousand pesos, the father or mother shall be considered a
guardian of the childs property, subject to the duties and
obligations of guardians under the Rules of Court.
Corollarily, Section 7, Rule 93 of the Rules of Court also provides:
SEC. 7. Parents as Guardians. When the property of the child
under parental authority is worth two thousand pesos or less, the
father or the mother, without the necessity of court appointment,
shall be his legal guardian. When the property of the child is worth
more than two thousand pesos, the father or the mother shall be
considered guardian of the childs property, with the duties and
obligations of guardians under these Rules, and shall file the
petition required by Section 2 hereof. For good reasons, the court
may, however, appoint another suitable persons.
Administration includes all acts for the preservation of the property
and the receipt of fruits according to the natural purpose of the
thing. Any act of disposition or alienation, or any reduction in the
substance of the patrimony of child, exceeds the limits of
administration.13 Thus, a father or mother, as the natural guardian
of the minor under parental authority, does not have the power to
dispose or encumber the property of the latter. Such power is
granted by law only to a judicial guardian of the wards property
and even then only with courts prior approval secured in
accordance with the proceedings set forth by the Rules of Court. 14
Consequently, the disputed sale entered into by Enrique in behalf
of his minor children without the proper judicial authority, unless
ratified by them upon reaching the age of majority,15 is
unenforceable in accordance with Articles 1317 and 1403(1) of the
Civil Code which provide:
ART. 1317. No one may contract in the name of another without
being authorized by the latter or unless he has by law a right to
represent him.
A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
ART. 1403. The following contracts are unenforceable, unless they
are ratified:
(1) Those entered into the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers;
xxx
Ratification means that one under no disability voluntarily adopts
and gives sanction to some unauthorized act or defective
proceeding, which without his sanction would not be binding on
him. It is this voluntary choice, knowingly made, which amounts to
a ratification of what was theretofore unauthorized, and becomes
the authorized act of the party so making the ratification. 16 Once
ratified, expressly or impliedly such as when the person knowingly
received benefits from it, the contract is cleansed from all its
defects from the moment it was constituted,17 as it has a
retroactive effect.
Records, however, show that Rosa had ratified the extrajudicial
settlement of the estate with absolute deed of sale. In Napoleon
and Rosas Manifestation18 before the RTC dated July 11,
1997,they stated:
"Concerning the sale of our parcel of land executed by our father,
Enrique Neri concurred in and conformed to by us and our other
two sisters and brother (the other plaintiffs), in favor of Hadji Yusop
Uy and his spouse Hadja Julpa Uy on July 7, 1979, we both
confirmed that the same was voluntary and freely made by all of us
and therefore the sale was absolutely valid and enforceable as far
as we all plaintiffs in this case are concerned;" (Underscoring
supplied)
In their June 30, 1997 Joint-Affidavit,19 Napoleon and Rosa also
alleged:
"That we are surprised that our names are included in this case
since we do not have any intention to file a case against Hadji
Yusop Uy and Julpha Ibrahim Uy and their family and we respect
and acknowledge the validity of the Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale dated July 7, 1979;"
(Underscoring supplied)
Clearly, the foregoing statements constitutedratification of the
settlement of the estate and the subsequent sale, thus, purging all
the defects existing at the time of its execution and legitimizing the
conveyance of Rosas 1/16 share in the estate of Anunciacion to
spouses Uy. The same, however, is not true with respect to
Douglas for lack of evidence showing ratification.
Considering, thus, that the extrajudicial settlement with sale is
invalid and therefore, not binding on Eutropia, Victoria and
Douglas, only the shares ofEnrique, Napoleon, Alicia, Visminda
and Rosa in the homestead properties have effectivelybeen
disposed in favor of spouses Uy. "A person can only sell what he
owns, or is authorized to sell and the buyer can as a consequence
acquire no more than what the sellercan legally transfer."20 On this
score, Article 493 of the Civil Codeis relevant, which provides:
Each co-owner shall have the full ownership of his part and of the
fruits and benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even substitute another person
in its enjoyment, except when personal rights are involved. But the
effect of the alienation or the mortgage, with respect to the co-
owners, shall be limited to the portion which may be allotted to him
in the division upon the termination of the co-ownership.
Consequently, spouses Uy or their substituted heirs became pro
indiviso co-owners of the homestead properties with Eutropia,
Victoria and Douglas, who retained title to their respective 1/16
shares. They were deemed to be holding the 3/16 shares of
Eutropia, Victoria and Douglas under an implied constructive trust
for the latters benefit, conformably with Article 1456 of the Civil
Code which states:"if property is acquired through mistake or
fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom
the property comes." As such, it is only fair, just and equitable that
the amount paid for their shares equivalent to P 5,000.0021 each or
a total of P 15,000.00 be returned to spouses Uy with legal
interest.
On the issue of prescription, the Court agrees with petitioners that
the present action has not prescribed in so far as it seeks to annul
the extrajudicial settlement of the estate. Contrary to the ruling of
the CA, the prescriptive period of 2 years provided in Section 1
Rule 74 of the Rules of
Court reckoned from the execution of the extrajudicial settlement
finds no application to petitioners Eutropia, Victoria and Douglas,
who were deprived of their lawful participation in the subject
estate. Besides, an "action or defense for the declaration of the
inexistence of a contract does not prescribe" in accordance with
Article 1410 of the Civil Code.
However, the action to recover property held in trust prescribes
after 10 years from the time the cause of action accrues, 22 which is
from the time of actual notice in case of unregistered deed. 23 In this
case, Eutropia, Victoria and Douglas claimed to have knowledge of
the extrajudicial settlement with sale after the death of their father,
Enrique, in 1994 which spouses Uy failed to refute. Hence, the
complaint filed in 1997 was well within the prescriptive period of 10
years.
WHEREFORE, the instant petition is GRANTED. The April 27,
2010 Decision and October 18, 2010 Resolution of the Court of
Appeals are REVERSED and SET ASIDE and a new judgment is
entered:
1. Declaring the Extra-Judicial Settlement of the Estate of
Anunciacion Neri NULL and VOID;
2. Declaring the Absolute Deed of Sale in favor of the late
spouses Hadji Yusop Uy and Julpha Ibrahim Uy as
regards the 13/16 total shares of the late Enrique Neri,
Napoleon Neri, Alicia D. Neri-Mondejar, Visminda D.
Neri-Chambers and Rosa D. Neri-Millan VALID;
3. Declaring Eutropia D. Illut-Cockinos, Victoria D. Illut-
Piala and Douglas D. Neri as the LAWFUL OWNERSof
the 3/16 portions of the subject homestead properties,
covered by Original Certificate of Title Nos. (P-7998) P-
2128, (P-14608) P-5153 and P-20551 (P-8348); and
4. Ordering the estate of the late Enrique Neri, as well as
Napoleon Neri, Alicia D. Neri-Mondejar, Visminda D.
Neri-Chambers and Rosa D. Neri-Millan to return to the
respondents jointly and solidarily the amount paid
corresponding to the 3/16 shares of Eutropia, Victoria
and Douglas in the total amount of P 15,000.00, with
legal interest at 6% per annum computed from the time
of payment until finality of this decision and 12% per
annum thereafter until fully paid.
No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 165133 April 19, 2010
SPOUSES JOSELINA ALCANTARA AND ANTONIO
ALCANTARA, and SPOUSES JOSEFINO RUBI AND ANNIE
DISTOR- RUBI, Petitioners,
vs.
BRIGIDA L. NIDO, as attorney-in-fact of REVELEN N.
SRIVASTAVA, Respondent.
RESOLUTION
CARPIO, J.:
The Case
Spouses Antonio and Joselina Alcantara and Spouses Josefino
and Annie Rubi (petitioners) filed this Petition for Review1 assailing
the Court of Appeals (appellate court) Decision2 dated 10 June
2004 as well as the Resolution3 dated 17 August 2004 in CA-G.R.
CV No. 78215. In the assailed decision, the appellate court
reversed the 17 June 2002 Decision4 of Branch 69 of the Regional
Trial Court of Binangonan, Rizal (RTC) by dismissing the case for
recovery of possession with damages and preliminary injunction
filed by Brigida L. Nido (respondent), in her capacity as
administrator and attorney-in-fact of Revelen N. Srivastava
(Revelen).
The Facts
Revelen, who is respondents daughter and of legal age, is the
owner of an unregistered land with an area of 1,939 square meters
located in Cardona, Rizal. Sometime in March 1984, respondent
accepted the offer of petitioners to purchase a 200-square meter
portion of Revelens lot (lot) at P200 per square meter. Petitioners
paid P3,000 as downpayment and the balance was payable on
installment. Petitioners constructed their houses in 1985. In 1986,
with respondents consent, petitioners occupied an additional 150
square meters of the lot. By 1987, petitioners had already
paid P17,5005 before petitioners defaulted on their installment
payments.
On 11 May 1994, respondent, acting as administrator and
attorney-in-fact of Revelen, filed a complaint for recovery of
possession with damages and prayer for preliminary injunction
against petitioners with the RTC.
The RTCs Ruling
The RTC stated that based on the evidence presented, Revelen
owns the lot and respondent was verbally authorized to sell 200
square meters to petitioners. The RTC ruled that since
respondents authority to sell the land was not in writing, the sale
was void under Article 18746 of the Civil Code.7 The RTC ruled that
rescission is the proper remedy.8
On 17 June 2002, the RTC rendered its decision, the dispositive
portion reads:
WHEREFORE, judgment is rendered in favor of plaintiff and
against the defendants, by -
1. Declaring the contract to sell orally agreed by the
plaintiff Brigida Nido, in her capacity as representative or
agent of her daughter Revelen Nido Srivastava, VOID
and UNENFORCEABLE.
2. Ordering the parties, upon finality of this judgment, to
have mutual restitution the defendants and all persons
claiming under them to peacefully vacate and surrender
to the plaintiff the possession of the subject lot covered
by TD No. 09-0742 and its derivative Tax Declarations,
together with all permanent improvements introduced
thereon, and all improvements built or constructed during
the pendency of this action, in bad faith; and the plaintiff,
to return the sum of P17,500.00, the total amount of the
installment on the land paid by defendant; the fruits and
interests during the pendency of the condition shall be
deemed to have been mutually compensated.
3. Ordering the defendants to pay plaintiff the sum
of P20,000.00 as attorneys fees, plus P15,000.00 as
actual litigation expenses, plus the costs of suit.
SO ORDERED.9
The Appellate Courts Ruling
On 5 January 2004, petitioners appealed the trial courts Decision
to the appellate court. In its decision dated 10 June 2004, the
appellate court reversed the RTC decision and dismissed the civil
case.10
The appellate court explained that this is an unlawful detainer
case. The prayer in the complaint and amended complaint was for
recovery of possession and the case was filed within one year
from the last demand letter. Even if the complaint involves a
question of ownership, it does not deprive the Municipal Trial Court
(MTC) of its jurisdiction over the ejectment case. Petitioners raised
the issue of lack of jurisdiction in their Motion to Dismiss and
Answer before the RTC.11 The RTC denied the Motion to Dismiss
and assumed jurisdiction over the case because the issues pertain
to a determination of the real agreement between the parties and
rescission of the contract to sell the property.12
The appellate court added that even if respondents complaint is
for recovery of possession or accion publiciana, the RTC still has
no jurisdiction to decide the case. The appellate court explained:
Note again that the complaint was filed on 11 May 1994. By that
time, Republic Act No. 7691 was already in effect. Said law took
effect on 15 April 1994, fifteen days after its publication in the
Malaya and in the Time Journal on 30 March 1994 pursuant to
Sec. 8 of Republic Act No. 7691.
Accordingly, Sec. 33 of Batas Pambansa 129 was amended by
Republic Act No. 7691 giving the Municipal Trial Court the
exclusive original jurisdiction over all civil actions involving title to,
or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not
exceed P20,000 or, in civil actions in Metro Manila, where such
assessed value does not exceed P50,000, exclusive of interest,
damages of whatever kind, attorneys fees, litigation expenses and
costs.
At bench, the complaint alleges that the whole 1,939- square
meter lot of Revelen N. Srivastava is covered by Tax Declaration
No. 09-0742 (Exh. "B", p. 100, Records) which gives its assessed
value of the whole lot of P4,890.00. Such assessed value falls
within the exclusive original prerogative or jurisdiction of the first
level court and, therefore, the Regional Trial Court a quo has no
jurisdiction to try and decided the same.131avvphi1
The appellate court also held that respondent, as Revelens agent,
did not have a written authority to enter into such contract of sale;
hence, the contract entered into between petitioners and
respondent is void. A void contract creates no rights or obligations
or any juridical relations. Therefore, the void contract cannot be the
subject of rescission.14
Aggrieved by the appellate courts Decision, petitioners elevated
the case before this Court.
Issues
Petitioners raise the following arguments:
1. The appellate court gravely erred in ruling that the
contract entered into by respondent, in representation of
her daughter, and former defendant Eduardo Rubi
(deceased), is void; and
2. The appellate court erred in not ruling that the
petitioners are entitled to their counterclaims, particularly
specific performance.15
Ruling of the Court
We deny the petition.
Petitioners submit that the sale of land by an agent who has no
written authority is not void but merely voidable given the spirit and
intent of the law. Being only voidable, the contract may be ratified,
expressly or impliedly. Petitioners argue that since the contract to
sell was sufficiently established through respondents admission
during the pre-trial conference, the appellate court should have
ruled on the matter of the counterclaim for specific performance. 16
Respondent argues that the appellate court cannot lawfully rule on
petitioners counterclaim because there is nothing in the records to
sustain petitioners claim that they have fully paid the price of the
lot.17 Respondent points out that petitioners admitted the lack of
written authority to sell. Respondent also alleges that there was
clearly no meeting of the minds between the parties on the
purported contract of sale.18
Sale of Land through an Agent
Articles 1874 and 1878 of the Civil Code provide:
Art. 1874. When a sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void.
Art. 1878. Special powers of attorney are necessary in the
following cases:
xxx
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
xxx
Article 1874 of the Civil Code explicitly requires a written authority
before an agent can sell an immovable property. Based on a
review of the records, there is absolutely no proof of respondents
written authority to sell the lot to petitioners. In fact, during the pre-
trial conference, petitioners admitted that at the time of the
negotiation for the sale of the lot, petitioners were of the belief that
respondent was the owner of lot.19 Petitioners only knew that
Revelen was the owner of the lot during the hearing of this case.
Consequently, the sale of the lot by respondent who did not have a
written authority from Revelen is void. A void contract produces no
effect either against or in favor of anyone and cannot be ratified.20
A special power of attorney is also necessary to enter into any
contract by which the ownership of an immovable is transmitted or
acquired for a valuable consideration. Without an authority in
writing, respondent cannot validly sell the lot to petitioners. Hence,
any "sale" in favor of the petitioners is void.
Our ruling in Dizon v. Court of Appeals21 is instructive:
When the sale of a piece of land or any interest thereon is through
an agent, the authority of the latter shall be in writing; otherwise,
the sale shall be void. Thus the authority of an agent to execute a
contract for the sale of real estate must be conferred in writing and
must give him specific authority, either to conduct the general
business of the principal or to execute a binding contract
containing terms and conditions which are in the contract he did
execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an
agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary
ingredient of the act mentioned. For the principal to confer the right
upon an agent to sell real estate, a power of attorney must so
express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language
so used conveys such power, no such construction shall be given
the document.
Further, Article 1318 of the Civil Code enumerates the requisites
for a valid contract, namely:
1. consent of the contracting parties;
2. object certain which is the subject matter of the
contract;
3. cause of the obligation which is established.
Respondent did not have the written authority to enter into a
contract to sell the lot. As the consent of Revelen, the real owner of
the lot, was not obtained in writing as required by law, no contract
was perfected. Consequently, petitioners failed to validly acquire
the lot.
General Power of Attorney
On 25 March 1994, Revelen executed a General Power of
Attorney constituting respondent as her attorney-in-fact and
authorizing her to enter into any and all contracts and agreements
on Revelens behalf. The General Power of Attorney was notarized
by Larry A. Reid, Notary Public in California, U.S.A.
Unfortunately, the General Power of Attorney presented as "Exhibit
C"22 in the RTC cannot also be the basis of respondents written
authority to sell the lot.
Section 25, Rule 132 of the Rules of Court provides:
Sec. 25. Proof of public or official record. An official record or an
entry therein, when admissible for any purpose, may be evidenced
by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in which
the record is kept is in a foreign country, the certificate may be
made by a secretary of embassy or legation consul general,
consul, vice consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in
which the record is kept, and authenticated by the seal of his
office.
In Teoco v. Metropolitan Bank and Trust Company,23 quoting Lopez
v. Court of Appeals,24 we explained:
From the foregoing provision, when the special power of attorney
is executed and acknowledged before a notary public or other
competent official in a foreign country, it cannot be admitted in
evidence unless it is certified as such in accordance with the
foregoing provision of the rules by a secretary of embassy or
legation, consul general, consul, vice consul, or consular agent or
by any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept of said public
document and authenticated by the seal of his office. A city judge-
notary who notarized the document, as in this case, cannot issue
such certification.25
Since the General Power of Attorney was executed and
acknowledged in the United States of America, it cannot be
admitted in evidence unless it is certified as such in accordance
with the Rules of Court by an officer in the foreign service of the
Philippines stationed in the United States of America. Hence, this
document has no probative value.
Specific Performance
Petitioners are not entitled to claim for specific performance. It
must be stressed that when specific performance is sought of a
contract made with an agent, the agency must be established by
clear, certain and specific proof.26To reiterate, there is a clear
absence of proof that Revelen authorized respondent to sell her
lot.
Jurisdiction of the RTC
Section 33 of Batas Pambansa Bilang 129,27 as amended by
Republic Act No. 7691 provides:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in Civil Cases.
Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts shall exercise:
xxx
(3) Exclusive original jurisdiction in all civil actions which involve
title to, possession of, real property, or any interest therein where
the assessed value of the property or interest therein does not
exceed Twenty thousand pesos (P20,000.00) or, in civil actions in
Metro Manila, where such assessed value does not exceed Fifty
thousand pesos (P50,000.00) exclusive of interest, damages of
whatever kind, attorneys fees, litigation expenses and costs: x x x
In Geonzon Vda. de Barrera v. Heirs of Vicente Legaspi,28 the
Court explained:
Before the amendments introduced by Republic Act No. 7691, the
plenary action of accion publiciana was to be brought before the
regional trial court. With the modifications introduced by R.A. No.
7691 in 1994, the jurisdiction of the first level courts has been
expanded to include jurisdiction over other real actions where the
assessed value does not exceed P20,000, P50,000 where the
action is filed in Metro Manila. The first level courts thus have
exclusive original jurisdiction over accion publiciana and accion
reivindicatoria where the assessed value of the real property does
not exceed the aforestated amounts. Accordingly, the jurisdictional
element is the assessed value of the property.
Assessed value is understood to be "the worth or value of property
established by taxing authorities on the basis of which the tax rate
is applied. Commonly, however, it does not represent the true or
market value of the property."
The appellate court correctly ruled that even if the complaint filed
with the RTC involves a question of ownership, the MTC still has
jurisdiction because the assessed value of the whole lot as stated
in Tax Declaration No. 09-0742 is P4,890.29 The MTC cannot be
deprived of jurisdiction over an ejectment case based merely on
the assertion of ownership over the litigated property, and the
underlying reason for this rule is to prevent any party from trifling
with the summary nature of an ejectment suit. 30
The general rule is that dismissal of a case for lack of jurisdiction
may be raised at any stage of the proceedings since jurisdiction is
conferred by law. The lack of jurisdiction affects the very authority
of the court to take cognizance of and to render judgment on the
action; otherwise, the inevitable consequence would make the
courts decision a "lawless" thing.31 Since the RTC has no
jurisdiction over the complaint filed, all the proceedings as well as
the Decision of 17 June 2002 are void. The complaint should
perforce be dismissed.
WHEREFORE, we DENY the petition. We AFFIRM the Decision
and Resolution of the Court of Appeals in CA-G.R. CV No. 78215.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 161407 June 5, 2009
JOAQUIN VILLEGAS and EMMA M. VILLEGAS, Petitioners,
vs.
RURAL BANK OF TANJAY, INC., Respondent.
DECISION
NACHURA, J.:
This petition for review on certiorari under Rule 45 of the Rules of
Court assails the Court of Appeals (CA) Decision1 in CA-G.R. CV
No. 40613 which affirmed with modification the Regional Trial
Court (RTC) Decision in Civil Case No. 9570.2
The facts, as summarized by the CA, follow.
Sometime in June, 1982, [petitioners], spouses Joaquin and
Emma Villegas, obtained an agricultural loan ofP350,000.00 from
[respondent] Rural Bank of Tanjay, Inc. The loan was secured by a
real estate mortgage on [petitioners] residential house and 5,229
sq.m. lot situated in Barrio Bantayan, Dumaguete City and covered
by TCT No. 12389.
For failure of [petitioners] to pay the loan upon maturity, the
mortgage was extrajudicially foreclosed. At the foreclosure sale,
[respondent], being the highest bidder, purchased the foreclosed
properties for P367,596.16. Thereafter, the Sheriff executed in
favor of [respondent] a certificate of sale, which was subsequently
registered with the Registry of Deeds of Dumaguete City.
[Petitioners] failed to redeem the properties within the one-year
redemption period.
In May, 1987, [respondent] and [petitioner] Joaquin Villegas,
through his attorney-in-fact[,] Marilen Victoriano, entered into an
agreement denominated as "Promise to Sell," whereby
[respondent] promised to sell to [petitioners] the foreclosed
properties for a total price of P713,312.72, payable within a period
of five (5) years. The agreement reads in part:
PROMISE TO SELL
xxxx
WITNESSETH:
xxxx
2) That for and in consideration of SEVEN HUNDRED
THIRTEEN THOUSAND AND THREE HUNDRED
TWELVE & 72/100 PESOS (P713,312.72), the VENDOR
do hereby promise to sell, transfer, and convey unto the
VENDEE, their heirs, successors and assigns, all its
rights, interests and participations over the above parcel
of land with all the improvements thereon and a
residential house.
3) That upon signing of this Promise To Sell, the
VENDEE shall agree to make payment of P250,000.00
(Philippine Currency) and the balance of P463,312.72
payable in equal yearly installments plus interest based
on the prevailing rate counting from the date of signing
this Promise to Sell for a period of five (5) years.
xxxx
5) Provided further, that in case of a delay in any yearly
installment for a period of ninety (90) days, this sale will
become null and void and no further effect or validity; and
provided further, that payments made shall be
reimbursed (returned) to the VENDEE less interest on
the account plus additional 15% liquidated damages and
charges.
Upon the signing of the agreement, [petitioners] gave [respondent]
the sum of P250,000.00 as down payment. [Petitioners], however,
failed to pay the first yearly installment, prompting [respondent] to
consolidate its ownership over the properties. Accordingly, TCT
No. 12389 was cancelled and a new one, TCT No. 19042, (Exh.
14) was issued in [respondents] name on November 8, 1989.
Thereafter, [respondent] took possession of the properties. Hence,
the action by [petitioners for declaration of nullity of loan and
mortgage contracts, recovery of possession of real property,
accounting and damages and, in the alternative, repurchase of real
estate] commenced on January 15, 1990.
In resisting the complaint, [respondent] averred that [petitioners]
have absolutely no cause of action against it, and that the
complaint was filed only to force it to allow [petitioners] to reacquire
the foreclosed properties under conditions unilaterally favorable to
them.
xxxx
After trial on the merits, the [RTC] rendered a Decision dismissing
the complaint, disposing as follows:
"In the light of the foregoing, it is considered opinion of this Court,
that [petitioners] failed to prove by preponderance of evidence their
case and therefore the herein complaint is ordered dismissed.
[Petitioners] are ordered to pay [respondent] the sum of P3,000.00
as attorneys fees and to pay costs without pronouncement as to
counterclaim.
SO ORDERED."3
On appeal by both parties, the CA affirmed with modification the
RTCs ruling, thus:
WHEREFORE, the appealed Decision is hereby MODIFIED by (a)
ORDERING [respondent] to reimburse [petitioners] their down
payment of P250,000.00 and (b) DELETING the award of
attorneys fees to [respondent].
SO ORDERED.4
Hence, this appeal by certiorari raising the following issues:
(1) The Court of Appeals erred in not holding that the
loan and mortgage contracts are null and void ab initio
for being against public policy;
(2) The Court of Appeals erred in not holding that, by
reason of the fact that the loan and mortgage contracts
are null and void ab initio for being against public policy,
the doctrine of estoppel does not apply in this case;
(3) The Court of Appeals erred in not finding that the
addendum on the promissory notes containing an
escalation clause is null and void ab initio for not being
signed by petitioner Emma M. Villegas, wife of petitioner
Joaquin Villegas, there being a showing that the
companion real estate mortgage involves conjugal
property. x x x.
(4) The Court of Appeals erred in not finding that the
addendum on the promissory notes containing an
escalation clause is null and void ab initio for being so
worded that the implementation thereof would deprive
petitioners due process guaranteed by [the] constitution,
the petitioners not having been notified beforehand of
said implementation.5
Notwithstanding petitioners formulation of the issues, the core
issue for our resolution is whether petitioners may recover
possession of the mortgaged properties.
The petition deserves scant consideration and ought to have been
dismissed outright. Petitioners are precluded from seeking a
declaration of nullity of the loan and mortgage contracts; they are
likewise barred from recovering possession of the subject
property.lavvphil
Petitioners insist on the nullity of the loan and mortgage contracts.
Unabashedly, petitioners admit that the loan (and mortgage)
contracts were made to appear as several sugar crop loans not
exceeding P50,000.00 each even if they were not just so the
respondent rural bank could grant and approve the same pursuant
to Republic Act (R.A.) No. 720, the Rural Banks Act. Petitioners
boldly enumerate the following circumstances that show that these
loans were obtained in clear contravention of R.A. No. 720:
(a) The petitioners never planted sugar cane on any
parcel of agricultural land;
(b) The mortgaged real estate is residential, with a
house, located in the heart of Dumaguete City, with an
area of only one-half (1/2) hectare;
(c) Petitioners never planted any sugar cane on this one-
half (1/2) hectare parcel of land;
(d) Petitioners were never required to execute any chattel
mortgage on standing crops;
(e) To make it appear that the petitioners were entitled to
avail themselves of loan benefits under Republic Act No.
720, Rural Banks Act, respondent made them sign
promissory notes for P350,000.00 in split amounts not
exceeding P50,000.00 each.6
In short, petitioners aver that the sugar crop loans were merely
simulated contracts and, therefore, without any force and effect.
Articles 1345 and 1346 of the Civil Code are the applicable laws,
and they unmistakably provide:
Art. 1345. Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at
all; the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is
not intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their real
agreement.
Given the factual antecedents of this case, it is obvious that the
sugar crop loans were relatively simulated contracts and that both
parties intended to be bound thereby. There are two juridical acts
involved in relative simulation the ostensible act and the hidden
act.7 The ostensible act is the contract that the parties pretend to
have executed while the hidden act is the true agreement between
the parties.8 To determine the enforceability of the actual
agreement between the parties, we must discern whether the
concealed or hidden act is lawful and the essential requisites of a
valid contract are present.
In this case, the juridical act which binds the parties are the loan
and mortgage contracts, i.e., petitioners procurement of a loan
from respondent. Although these loan and mortgage contracts
were concealed and made to appear as sugar crop loans to make
them fall within the purview of the Rural Banks Act, all the essential
requisites of a contract9 were present. However, the purpose
thereof is illicit, intended to circumvent the Rural Banks Act
requirement in the procurement of loans.10 Consequently, while the
parties intended to be bound thereby, the agreement is void and
inexistent under Article 140911 of the Civil Code.
In arguing that the loan and mortgage contracts are null and void,
petitioners would impute all fault therefor to respondent. Yet,
petitioners averments evince an obvious knowledge and
voluntariness on their part to enter into the simulated contracts.
We find that fault for the nullity of the contract does not lie at
respondents feet alone, but at petitioners as well. Accordingly,
neither party can maintain an action against the other, as provided
in Article 1412 of the Civil Code:
Art. 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed:
(1) When the fault is on the part of both contracting
parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the others
undertaking;
(2) When only one of the contracting parties is at fault, he
cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may
demand the return of what he has given without any
obligation to comply with his promise.
Petitioners did not come to court with clean hands. They admit that
they never planted sugarcane on any property, much less on the
mortgaged property. Yet, they eagerly accepted the proceeds of
the simulated sugar crop loans. Petitioners readily participated in
the ploy to circumvent the Rural Banks Act and offered no
objection when their original loan of P350,000.00 was divided into
small separate loans not exceeding P50,000.00 each. Clearly, both
petitioners and respondent are in pari delicto, and neither should
be accorded affirmative relief as against the other.
In Tala Realty Services Corp. v. Banco Filipino Savings and
Mortgage Bank,12 we held that when the parties are in pari delicto,
neither will obtain relief from the court, thus:
The Bank should not be allowed to dispute the sale of its lands to
Tala nor should Tala be allowed to further collect rent from the
Bank. The clean hands doctrine will not allow the creation or the
use of a juridical relation such as a trust to subvert, directly or
indirectly, the law. Neither the bank nor Tala came to court with
clean hands; neither will obtain relief from the court as one who
seeks equity and justice must come to court with clean hands. By
not allowing Tala to collect from the Bank rent for the period during
which the latter was arbitrarily closed, both Tala and the Bank will
be left where they are, each paying the price for its deception.13
Petitioners stubbornly insist that respondent cannot invoke the pari
delicto doctrine, ostensibly because of our obiter in Enrique T.
Yuchengco, Inc., et al. v. Velayo.14
In Yuchengco, appellant sold 70% of the subscribed and
outstanding capital stock of a Philippine corporation, duly licensed
as a tourist operator, to appellees without the required prior notice
and approval of the Department of Tourism (DOT). Consequently,
the DOT cancelled the corporations Local Tour Operators
License. In turn, appellees asked for a rescission of the sale and
demanded the return of the purchase price.
We specifically ruled therein that the pari delicto doctrine is not
applicable, because:
The obligation to secure prior Department of Tourism approval
devolved upon the defendant (herein appellant) for it was he as the
owner vendor who had the duty to give clear title to the properties
he was conveying. It was he alone who was charged with knowing
about rules attendant to a sale of the assets or shares of his
tourist-oriented organization. He should have known that under
said rules and regulations, on pain of nullity, shares of stock in his
company could not be transferred without prior approval from the
Department of Tourism. The failure to secure this approval is
attributable to him alone.15
Thus, we declared that even assuming both parties were guilty of
the violation, it does not always follow that both parties, being in
pari delicto, should be left where they are. We recognized as an
exception a situation when courts must interfere and grant relief to
one of the parties because public policy requires their intervention,
even if it will result in a benefit derived by a plaintiff who is in equal
guilt with defendant.16
In stark contrast to Yuchengco, the factual milieu of the present
case does not compel us to grant relief to a party who is in pari
delicto. The public policy requiring rural banks to give preference
to bona fide small farmers in the grant of loans will not be served if
a party, such as petitioners, who had equal participation and equal
guilt in the circumvention of the Rural Banks Act, will be allowed to
recover the subject property.
The following circumstances reveal the utter poverty of petitioners
arguments and militate against their bid to recover the subject
property:
1. As previously adverted to, petitioners readily and
voluntarily accepted the proceeds of the loan, divided
into small loans, without question.
2. After failing to redeem the mortgaged subject property,
thereby allowing respondent to consolidate title
thereto,17 petitioners then entered into a Promise to Sell
and made a down payment of P250,000.00.
3. Failing anew to comply with the terms of the Promise
to Sell and pay the first yearly installment, only then did
petitioners invoke the nullity of the loan and mortgage
contracts.
In all, petitioners explicitly recognized respondents ownership over
the subject property and merely resorted to the void contract
argument after they had failed to reacquire the property and a new
title thereto in respondents name was issued.
We are not unmindful of the fact that the Promise to Sell ultimately
allows petitioners to recover the subject property which they were
estopped from recovering under the void loan and mortgage
contracts. However, the Promise to Sell, although it involves the
same parties and subject matter, is a separate and independent
contract from that of the void loan and mortgage contracts.
To reiterate, under the void loan and mortgage contracts, the
parties, being in pari delicto, cannot recover what they each has
given by virtue of the contract.18 Neither can the parties demand
performance of the contract. No remedy or affirmative relief can be
afforded the parties because of their presumptive knowledge that
the transaction was tainted with illegality.19 The courts will not aid
either party to an illegal agreement and will instead leave the
parties where they find them.20
Consequently, the parties having no cause of action against the
other based on a void contract, and possession and ownership of
the subject property being ultimately vested in respondent, the
latter can enter into a separate and distinct contract for its
alienation. Petitioners recognized respondents ownership of the
subject property by entering into a Promise to Sell, which
expressly designates respondent as the vendor and petitioners as
the vendees. At this point, petitioners, originally co-owners and
mortgagors of the subject property, unequivocally acquiesced to
their new status as buyers thereof. In fact, the Promise to Sell
makes no reference whatsoever to petitioners previous ownership
of the subject property and to the void loan and mortgage
contracts.21 On the whole, the Promise to Sell, an independent
contract, did not purport to ratify the void loan and mortgage
contracts.lawphi1
By its very terms, the Promise to Sell simply intended to alienate to
petitioners the subject property according to the terms and
conditions contained therein. Article 1370 of the Civil Code reads:
Art. 1370. If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of
its stipulations shall control.
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
Thus, the terms and conditions of the Promise to Sell are
controlling.
Paragraph 5 of the Promise to Sell provides:
5) Provided further, that in case of a delay in any yearly installment
for a period of ninety (90) days, this sale will become null and void
[without] further effect or validity; and provided further, that
payments made shall be reimbursed (returned to the VENDEE
less interest on the account plus additional 15% liquidated
damages and charges.22
As stipulated in the Promise to Sell, petitioners are entitled to
reimbursement of the P250,000.00 down payment. We agree with
the CAs holding on this score:
We note, however, that there is no basis for the imposition of respondent to reimburse petitioners for their down payment
interest and additional 15% liquidated damages and charges on of P250,000.00 and disallowed respondents claim for actual,
the amount to be thus reimbursed. The "Promise to Sell" is moral and exemplary damages and attorneys fees.
separate and distinct from the loan and mortgage contracts earlier
executed by the parties. Obviously, after the foreclosure, there is WHEREFORE, premises considered, the petition is hereby
no more loan or account to speak of to justify the said imposition. 23 DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
40613 is hereby AFFIRMED. Costs against petitioners.
Finally, contrary to petitioners contention, the CA, in denying
petitioners appeal, did not commit an error; it did not ratify a void SO ORDERED.
contract because void contracts cannot be ratified. The CA simply
refused to grant the specific relief of recovering the subject
property prayed for by petitioners. Nonetheless, it ordered